Casino - Further assets sales.

All,

Please refer to our unchanged analysis here.

There has been increased press speculation recently in relation to Casino monetising its listed and unlisted assets to further deleverage Casino France entity. This is not a surprise as we continue to struggle to model any significant positive cash flow from Casino France. We do, however, remain comfortable with the asset value of Casino. The problem remains cashflow. None of the listed or unlisted assets generates cash flow or dividends to Casino France, and therefore Casino France will need to monetise their equity stakes to realise value.

So which assets will they sell?

As we wrote in our last note, we expect some announcement of the intention to sell GreenYellow in order to reduce Gross Leverage. This is the easiest and most obvious non-core asset for Casino to sell. Any valuation is likely to be €500m+ and will have limited impact on the cash flow generation at Casino France.

There is increased speculation about partially selling down their stake in Cnova. Casino owns 65% directly, with 34% owned by GPA (with less than 1% free float). However, we view this business as core to Casino and strategically important. The business is still ramping up and Casino are likely to be reluctant to sell a significant portion at the current time. One option is for GPA to sell down its stake and do a special dividend, with Casino owning c.41% of GPA. This would involve significant leakage to external shareholders but would leave Casino with undisputed control through a simpler structure.

With the short to medium-term maturities in Casino trading very tight there is no opportunity to invest in these Casino bonds. The opportunity set for any meaningful returns centres on the Hybrid and TSSDI (deeply Subordinated) bonds and the equity (and in turn the Rallye bonds).

We remain long Rallye bonds for a small position of 1.5% of NAV to generally capture some of that upside as well as any transaction related upside at Rallye.

Happy to discuss.

Tomás
___________________

Tomás Mannion
2 Stephen Street
London W1T 1AN
E: tmannion@sarria.co.uk
T: +44 20 3744 7009M:+44 7786 705 806
www.sarria.co.uk