Casino signs lock-up agreement with secured creditors, still in talks with unsecured creditors

By Marisa Wong

Los Angeles, Oct. 5 – Casino Guichard-Perrachon (Groupe Casino) announced on Thursday that it has entered into a lock-up agreement relating to its financial restructuring with, on the one hand, EP Equity Investment III Sarl, an entity controlled by Daniel Kretinsky, Fimalac and Attestor (the “consortium”), and, on the other hand, creditors beneficially holding 75% of the company’s term loan B, principal commercial banking groups and some of the above-mentioned creditors beneficially holding 92% of the company’s revolving credit facility, as well as holders of notes issued by Quatrim representing 58% of these notes.

Casino’s chief executive officer Jean-Charles Naouri said in a press release, “Casino has reached a major milestone in its financial restructuring process by obtaining the agreement of its main creditors on a financial restructuring plan that creates a favorable framework for the sustainability of the group’s activities, the continuation of jobs and head offices, and the continued development of all its brands. This agreement has been designed and implemented in the interests of all stakeholders, in particular customers, employees, partners and franchisees.”

Listing of Casino’s shares and other listed securities issued by the company that were suspended on Wednesday will resume on Thursday at the opening of the market, the company noted in its latest announcement.

Key restructuring terms

The signing of the lock-up agreement is a continuation of the agreement in principle reached on July 27 with the consortium and certain secured creditors and the agreement in principle reached on Sept. 18 with an ad hoc group of holders of Quatrim’s notes representing a majority of bondholders.

The financial restructuring agreement provides for an equity injection as well as a reduction of the group’s financial debt by €6.1 billion, primarily through the following: equity injection; conversion of debt into equity; and treatment of residual debt.

Equity injection involves the following:

• €1.2 billion euros of additional equity, comprising €925 million subscribed by the consortium and €275 million open to, by order of priority, (a) secured creditors (revolver and term loan B), (b) unsecured creditors, (c) perpetual creditors, (d) all creditors (secured, unsecured and perpetual creditors) and (e) shareholders (which amount will be fully backstopped by a group of creditors); and

• Allocation of warrants to the consortium, to the secured creditors backstopping the €275 million capital increase and to the secured creditors subscribing to their full pro rata entitlement of such backstopped capital increase.

Conversion of debt into equity includes the following:

• Conversion of all unsecured debt into equity (including principal and deferred and accrued interest until the restructuring date), namely €3.518 billion and $5 million of debt, consisting of €2.168 billion of unsecured debt (high-yield notes, euro medium-term notes) and $5 million dollars of NEU commercial paper, and €1.35 billion of hybrid notes; and

• Conversion into equity of €1.355 billion of secured debt (including term loan B and revolver claims which will not be elevated in the reinstated revolver).

Treatment of residual debt comprises the following:

• Residual claims under the revolver and term loan B will be reinstated for a total amount of €2.121 billion, corresponding to a reinstated revolver of €711 million (with the creditors being the providers of operational financing) with a four-year maturity and a reinstated term loan of €1.41 billion euros (to be held by existing term loan B lenders and by revolver lenders, except those who will have elevated their full claims in the reinstated revolver) with a three-year maturity;

• Notes issued by Quatrim: €567 million reinstated with three-year maturity extension, i.e., to January 2027 with an additional one-year extension option at Quatrim’s discretion;

• Notes issued by Monoprix Exploitation, €120 million euros: repayment upon completion of the restructuring;

• Continuation of other committed facilities and of the group’s operational financings for a total amount of €1.178 billion for a two-year period from the date of completion of the restructuring, with an optional one-year extension at Casino’s discretion (subject to compliance with the financial covenants of the reinstated revolver);

• Restructuring of certain interest rate swaps, including freezing their market value and repaying this amount over a three-year period from closing, with customary events of default limited to certain events and a release of the guarantees issued by the company.

Casino mentioned that an agreement in principle was entered into with the French government to defer payment of the group’s tax and social security liabilities due between May and September 2023, representing an amount of around €300 million. This amount has been agreed in exchange for the group granting certain guarantees, including first-rank pledges, and will be paid on the completion date of the financial restructuring as announced in a June 21 press release.

Upon completion of the planned restructuring, the consortium ad hoc vehicle will control Casino, it being specified that EP Equity Investment III Sarl (an entity controlled by Kretinsky) has control of the consortium SPV.

In any event, Casino’s current shareholders will be massively diluted, and Rallye will no longer control Casino.

The implementation of the financial restructuring is still subject to the satisfaction of the following primary conditions:

• Receipt of an independent expert report confirming the fairness of the financial terms of the restructuring for Casino shareholders;

• Obtaining of regulatory clearances (merger control, foreign investments, the Luxembourg Insurance Commission and, where applicable, regulation governing foreign subsidies);

• Publication of AMF’s exemption of the consortium to file a mandatory public offer on Casino;

• Approval of the accelerated safeguard plans by the Commercial Court of Paris; and

• Approval by the AMF of the prospectus for securities to be issued as part of the financial restructuring.

With regard to the governance of the group, the appointment of Philippe Palazzi as president and chief executive officer (President Directeur-General) will be proposed by the consortium and the board of directors will be comprised in accordance with the Afep-Medef Code of Corporate Governance.

A presentation outlining the key terms of the group’s financial restructuring has been posted on Casino’s website.

Talks with unsecured creditors

Casino said the group and the consortium have continued negotiations with a group of high-yield noteholders and a group of euro MTN bondholders in order to agree on the treatment of these notes as part of the financial restructuring provided for in the lock-up agreement.

At the end of these negotiations, the proposal of the group and the consortium is as follows:

• Support fee (to be paid in cash) for accession to the lock-up agreement by unsecured creditors of 15 basis points computed on the nominal value of the relevant notes, this fee being increased to 40 bps in the event of a vote in favor of the plan by the considered class or classes of creditors under the accelerated safeguard proceedings, i.e., more than two-thirds of votes cast;

• Conversion of all unsecured debt (including principal and deferred and accrued interest to the date of completion of the restructuring) into equity in exchange for about 1.7% of Casino’s share capital at the date of completion of the financial restructuring;

• Allocation of warrants to holders of the high-yield notes and euro MTNs giving them access to 2.5% of Casino’s share capital on a fully diluted basis (in case of accession to the lock-up agreement by noteholders holding more than 50% of the unsecured debt) or to 5% of Casino’s share capital on a fully diluted basis (in case of accession to the lock-up agreement by noteholders holding more than two-thirds of the unsecured debt. These warrants would be exercisable at an exercise price reflecting a 100% recovery for the group’s secured creditors who do not participate for their full pro rata entitlement in the €275 million backstopped capital increase;

• Option to participate in the above-mentioned capital increase of €275 million, if this amount is not fully subscribed by the secured creditors.

To date, this proposal has not been accepted by the aforementioned groups, according to Thursday’s announcement. The creditors concerned may nevertheless adhere to the lock-up agreement on the basis of the group’s and the consortium’s proposal, which the group intends to implement under accelerated safeguard proceedings.

Talks with holders of perpetuals

Casino and the consortium have pursued negotiations with a group of holders of perpetual subordinated notes (TSSDI) in order to agree on the treatment of these notes as part of the financial restructuring provided for in the lock-up agreement.

Following these negotiations, the group and the consortium have made the following proposal:

• A support fee of 15 bps computed on the nominal value of the perpetual subordinated notes, this fee being increased to 40 bps in the event of a two-thirds majority vote in favor of the class concerned under the accelerated safeguard procedure;

• Conversion into equity of all perpetual subordinated notes (including principal and deferred and accrued interest up to the date of completion of the restructuring) in exchange for about 0.4% of Casino’s share capital at the date of completion of the financial restructuring;

• Option to participate in the capital increase of €275 million, if this amount is not fully subscribed by the secured and unsecured creditors.

To date, the proposal of the group and the consortium has not been accepted by the holders of the perpetual subordinated notes. The creditors concerned may nevertheless adhere to the lock-up agreement on the basis of the group’s and the consortium’s proposal, which the group intends to implement under the accelerated safeguard proceedings.

Accession to lock-up

Creditors holding Casino’s debt will have the opportunity to accede to the lock-up agreement as of Oct. 5 by contacting Kroll, acting as agent for the lock-up agreement (attn.: Victor Parzyjagla and/or Thomas Choquet; casino@is.kroll.com).

In consideration for the undertakings made under the lock-up agreement, the unsecured financial creditors and holders of perpetual subordinated notes who have acceded to the lock-up agreement and accepted its terms and conditions will receive the support fee. The support fee will be paid in cash by the company on or around the completion date of the financial restructuring.

The last date to accede to lock-up agreement is Oct. 11, with a possible extension subject to the prior approval of the consortium SPV and of the company.

Next steps

Casino said it intends to pursue its discussions with the financial creditors not yet party to the lock-up agreement to obtain their adherence to the agreement.

The group will present, within the deadline of the current conciliation procedure, requests for the initiation of accelerated safeguard procedures to enable the implementation of the financial restructuring.

The group will request the consent of certain of its creditors (under the revolver, term loan B and senior secured notes issued by Quatrim) as may be reasonably necessary to implement the transaction, and will also request certain waivers under the relevant finance documents and an amendment to the existing intercreditor agreement entered into between the Group and the above mentioned creditors.

Proposed timeline

The company has laid out the following indicative timeline for the next steps of the restructuring:

• Lock-up agreement accession period will run until Oct. 11;

• Oct. 25 is the deadline for obtaining a decision by the relevant commercial court to open an accelerated safeguard proceedings and the deadline for committing to subscribe to the backstopped capital increase of €275 million;

• Setting up of classes of affected parties will be in early November;

• Early January is when classes of affected parties will vote on the proposed accelerated safeguard plans;

• Approval of the accelerated safeguard plans by the relevant Commercial Court is expected early February; and

• First quarter of 2024 is the expected completion of the financial restructuring.

Casino said it will keep the market informed of the next steps of the financial restructuring.

Group debt details

The group’s secured debt, the holders of which are affected by the lock-up agreement procedures described in Thursday’s press release, includes the following debt:

• Revolving facility agreement;

• Term loan B; and

• Secured high-yield notes issued by Quatrim (ISIN: XS2010039118, XS2010038490).

The group’s unsecured debt, the holders of which are affected by the lock-up agreement procedures, comprises the following:

• Unsecured high-yield notes with a principal amount of €400 million maturing on Jan. 15, 2026 (ISIN: XS2276596538);

• Unsecured high-yield notes with a principal amount of €525 million maturing on April 15, 2027 (ISIN: XS2328426445);

• Euro medium-term notes with a principal amount of €509.1 million maturing on March 7, 2024 (ISIN: FR0011765825);

• Euro medium-term notes with a principal amount of €357.4 million maturing on Feb. 7, 2025 (ISIN: FR0012369122);

• Euro medium-term notes with a principal amount of €449.8 million maturing on Aug. 5, 2026 (ISIN: FR0012074284);

• Commercial paper (billet de tresorerie) in the principal amount of $5 million (ISIN: FR0127851899)

• Titres super subordonnes a duree indeterminee (TSSDI) with a principal amount of €600 million (ISIN: FR0010154385);

• Titres super subordonnes a duree indeterminee (TSSDI) with a principal amount of €750 million (ISIN: FR0011606169).

• Interest rate swaps entered into by Casino Finance or any termination claim in respect of these interest rate swaps; and

• Notes issued by Monoprix Exploitation for a principal amount of €120 million.

The issuer is a mass retailer with headquarters in Saint-Etienne, France.

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