French grocery store chain On line casino is predicted to start official negotiations with collectors this week, as a bunch of rich traders circle the indebted retail empire constructed by Jean-Charles Naouri.
Saddled with an excessive amount of debt, declining revenues and a lack of market share, On line casino, which owns the Franprix and Monoprix chains, has been ailing for a number of years. The retailer’s father or mother firms by which Naouri controls On line casino have been in court-supervised restructuring since 2019.
This week On line casino is predicted to enter a voluntary negotiation with its collectors — known as a process de conciliation — that will likely be overseen by a court-appointed official, Marc Sénéchal, a well known lawyer specialising in such instances, based on a number of individuals concerned within the course of.
Underneath French legislation, the step is one wanting a court-supervised debt restructuring — although it might pave the way in which for such a transfer — however for now it opens up a crucial chapter for a corporation that employs 53,000 individuals and is the nation’s sixth-biggest meals retailer by market share.
The choice to start official negotiations with collectors, which embody main French banks and worldwide hedge funds, comes as On line casino has drawn curiosity from a handful of high-profile traders and billionaires.
In April, Czech billionaire Daniel Křetínský, already On line casino’s second-largest shareholder, provided to steer a €1.1bn funding, a transfer that might dilute Naouri and rip management of the grocery store chain from him. The proposal is backed by investor Marc Ladreit de Lacharrière, whose Fimalac group is now On line casino’s third-largest shareholder.
Křetínský’s intervention initially appeared prefer it may derail a plan introduced in March to mix On line casino’s French retail enterprise with Teract, a smaller rival backed by entrepreneur Moez-Alexandre Zouari, tech billionaire Xavier Niel and funding banker Matthieu Pigasse.
However because the stress to resolve On line casino’s future intensifies, the 2 camps are speaking and will likely be concerned within the conciliation course of that’s designed to achieve settlement each on On line casino’s debt and the eventual construction of the group, based on individuals accustomed to the matter.
The retailer and the holding firms by which Naouri controls his stake have €4.9bn in debt repayments due by 2025. On line casino had €6.4bn of debt on the finish of final yr.
Identified for his monetary engineering that helped create a enterprise empire with holdings spanning Brazilian meals retailers to renewable power, Naouri has lengthy tried to protect his controlling stake regardless of the deteriorating image at On line casino and its father or mother firms, together with Rallye. His likelihood of doing so, nevertheless, is more and more slim, the individuals stated.
“Everyone seems to be speaking to everybody. All of them know one another,” one of many individuals stated. “[Naouri] is now obliged to do a deal the place he’ll lose management . . . Final yr he didn’t assume he needed to, however the enterprise has deteriorated since then.”
Earlier this month, ranking company S&P downgraded On line casino, saying “a default, distressed alternate, or redemption seem inevitable inside six months, absent unanticipated and considerably beneficial” adjustments within the group’s circumstances.
On line casino stated it was “fastidiously reviewing the assorted expressions of curiosity” within the group and that “finally, selections will relaxation with the board”. Teract declined to remark and Křetínský didn’t reply to a request for remark.
The proposals from Teract and Křetínský would offer aid in several methods for On line casino, which reported an virtually 5 cent decline in revenues at its French enterprise final quarter.
The previous would spin out the French retail operation, reposition the group upmarket with a concentrate on farm contemporary merchandise, present a money injection of at the very least €300mn and an choice to promote shops to competitor Intermarché. Křetínský’s provide, in the meantime, would ship extra funding however not deal with the chain’s operational issues.
On line casino and Naouri’s lenders, which embody BNP Paribas and Crédit Agricole, may even have sway over the ultimate end result, whereas secured and unsecured collectors embody a number of US and European hedge funds.
“There are such a lot of parameters and gamers, so it’s arduous to foretell the way it all may shake out,” stated one particular person concerned. “It’s extra difficult than three dimensional chess.”
Relying on how the conciliation course of goes, On line casino could but find yourself in a extra in depth debt restructuring course of, identified in France as a process de sauvegarde. It has two kinds, accelerated and normal.
One benefit of making an attempt to restructure the money owed inside the conciliation or accelerated safeguard framework is that the method is confined to monetary stakeholders, conserving On line casino’s suppliers out of it. “Bruno Le Maire [French finance minister] is not going to enable them to default” on suppliers, stated one On line casino bondholder.
Given the scale of On line casino’s workforce and its vary of suppliers from dairy farmers to vegetable producers, the French authorities is carefully monitoring occasions.
However figuring out On line casino’s future will likely be difficult by the labyrinthine construction that Naouri has constructed. Its regular slide from investment-grade credit score to the bottom reaches of junk have left the group with excellent bonds and loans on a number of phrases.
The advanced image makes forging any settlement amongst its collectors notably fraught, collectors and advisers have stated.
For instance, a portion of On line casino’s secured loans are anticipated to be assumed by Teract if that deal is struck, an association that might show contentious if these lenders are nonetheless capable of have a say on debt that’s left at what stays of On line casino. In the meantime, some house owners of On line casino’s unsecured bonds even have extra investor protections than others, an additional impediment to collectors discovering widespread floor.
As collectors assess their choices, there are indicators that Křetínský and the backers of the Teract proposal are open to working collectively. Křetínský informed Le Level journal earlier this month that his capital injection is “not contradictory” to the Teract challenge, whereas Moez informed Agence France-Presse they’d be “joyful to accomplice with somebody as seasoned” as Křetínský.
“The probability of seeing each Křetínský and Teract taking on On line casino is now greater than ever,” stated Clément Genelot, an analyst at Bryan Garnier.
Genelot reckons one state of affairs that would emerge would give Teract a 30 per cent stake in On line casino’s core French enterprise, Intermarché round 1 / 4, Křetínský round 20 per cent and Naouri underneath 10 per cent.
However with the talks within the process de conciliation solely anticipated to start this week, there may be unlikely to be a fast repair for On line casino.