Casino thoughts
All,
Casino launched the tender offer (subject to completion of the €1.5bn bond/Term Loan B fund raising) this morning: Is it false confidence or just getting the ducks in a row?
Under the current financing proposal Casino envisages having E700m available to tender for outstanding bonds of the 20s, 21s and 22s. The tender this morning is for all of the 2020 bonds (E500m) with the balance of at least 200m to be split evenly between the ’21’s and ’22’s. This is broadly in line with market expectation and what was displayed in the offering presentation.
1) Mixed signals on funding:
- Quality of security package: Investors are concerned about the land bank having no planning permission and about how the real estate - being tied to company/retail performance - may be aggressively valued. The Sr. Sec bonds receive a less attractive security package than both the loans and the RCF (CGP operating assets, LatAm, etc.):
136% coverage from Real Estate:
- E910m operating assets, paying E47m of rent per a new master lease agreement:
- Quatrim 30 big boxes + 33 supermarkets + some convenience stores = E450m = 60%
- Shopping malls, parking lots, petrol stations and land = E460 = 61%
- E110m non-operating (other RE related) assets - appear to be primarily equity investments in REITs of c. E67m.
46% = E350m coverage from Intercompany loans ( sub. to RCF, then p.p. with external liabilities) + g’tees on same interest as the secured bonds:
- GCF E100m
- Casino France E150m
- Monoprix E75m
- Segisor E24m
- We are thinking about it in two ways:
1) if Casino would re-pay the intracompany loans and the secured would then have recourse only to the assets in Quatrim/IGC, then they’d
receive
a gross E47m rental income stream on E400m of loans. That should be sufficient.
2) The company could afford to pay 4.1% coupon and still claim 2x interest coverage (the intercompany proceed loans will have identical interest rates to the bonds)
2) The currently proposed structure could expose the bonds after the RCF matures in 2023.
- In defence of the RCF banks, RCFs usually mature first.
3) Except for their security over the E350m intercompany loans detailed above, the secured bonds would have no claim on or guarantee from the operating businesses of Casino. So is it being marketed to the right audience - HY investors?
4) No update on price talk (per yesterday night).
Moody's has assigned a B1 rating to the EUR750 million senior secured term loan B to be issued by Casino and a B1 rating to the EUR750 million senior secured instrument to be issued by Casino's subsidiary Quatrim S.A.S.
Further notes:
- Quatrim, the Issuer of the Senior Secured Notes, is the sole owner of IGC, another French Comany, whose primary activity is the direct or indirect holding of real estate or leases to real estate. Currently, in this entity are the JV subject to the Apollo and Fortress sale and leaseback, ownership of the Mercialys shares, holder of GreenYellow, the energy business. It is envisaged that through the IGC reorganisation, these assets may be sold or transferred to other entities of the Group.
- After these tranactions, IGC, will own a diversified portfolio of real estate, valued externally at Dec 18, at c. €1,026m and c. €966m, excluding transfer taxes. Asset Includes Hypermarkets 36%, Sueprmarkets 7%, Convenience Stores, 1% (Total Stores 44%), Shopping malls, 14%, Parking Lots, petrol stations and land 30%, restaurants 1% (other operating assets 45%). This breakdown is 89% of the the assets, with other assets including non-operating assets 2%, Shares in JVs 3% and Shares in Real estate investment vehicles 6%.
Tomas is your analyst
Wolfgang