Casino Moves to Reassure Investors After S&P Negative Watch

  • The French retailer says it is committed to its disposal plan
  • The group has 3.5 billion euros of unused credit lines

Casino Guichard-Perrachon said it would work with Standard and Poor’s to conduct a review of its credit rating after the rating agency placed it under negative watch, citing concerns about the French retailer’s debt and a poor environment in Brazil and Asia.

“In the context of challenging macroeconomic conditions in emerging markets and Brazil’s current recession, Standard & Poor’s wishes to update its assessment of Casino’s credit. As a result, the agency has placed the Group’s BBB- credit rating under CreditWatch Negative,” Casino said in a statement Monday.

In a note released Saturday, S&P said Casino’s BBB- long-term rating may be cut to junk as its profitability will continue to be fairly weak for an extended period of time and its debt levels, primarily located at the French operations, are too high. S&P had confirmed Casino’s rating in December but the company Thursday lowered its expectations for underlying earnings before interest and tax in 2015, sending the stock to its lowest in more than two decades.

The retailer is under attack by short-seller Carson Block’s Muddy Waters LLC, which contends that Casino is using financial engineering to mask a sharply deteriorating core business. It also said S&P has understated the retailer’s “dangerously” high debt burden. Casino has rejected the claims, saying it has a solid financial structure and that it may take legal action.

In the statement, Casino said the expected improvement in its operating performance in France in 2016 and a plan to divest assets will strengthen its financial structure. Casino plans to sell its Big C subsidiary in Thailand a business in Vietnam by the end of the first half.

“In the current macro-economic environment, we’re working very actively to our deleveraging," Casino’s chief financial officer Antoine Giscard d’Estaing said in a phone interview. “We have no liquidity issue.”

The group has unused credit lines of more than 3.5 billion euros ($3.83 billion) that it doesn’t need to use, he said.

Before it's here, it's on the Bloomberg Terminal.