UPDATE 2-Debt-ridden retailer Casino's shares suspended as investors brace for restructuring

Dominique Vidalon

for restructuring@

* Casino shares slump before suspension, CDS hits record high

* Consistent concerns over debts at Casino and Rallye (Adds Casino suspension, more detail and background)

PARIS, May 23 (Reuters) - Trading in the shares of French supermarket group Casino and its parent company Rallye were suspended on Thursday, fuelling speculation of a debt restructuring at the financially strained companies.

Shares in Casino, which is grappling with a tricky combination of high debt and a tough business environment in France fell by as much as 7 percent in early trade before being suspended at 0831 GMT, while Casino's credit default swaps (CDS) hit record highs.

Casino and Rallye will make a statement later on, but did not provide further details.

Casino, whose credit rating was further pushed into junk status by Standard & Poor's in March and which was also downgraded by Moody's in April, has embarked upon asset sales to cut its debt and ease concerns over the financial position of both Casino and its parent holding company Rallye.

"The suspension of the parent company shares suggest that a form of debt restructuring will have to take place in those companies," Bernstein analyst Bruno Monteyne said in a note.

Casino is the main asset of Rallye, which has a 51.7 percent stake in the company. Rallye in turn is controlled by Fonciere Euris, Finatis and Euris, all in the hands of Casino chairman and CEO Jean-Charles Naouri.

A restructuring "leads probably to Mr Naouri losing majority shareholder control of the holding companies," Monteyne added.

Shares in Rallye, Fonciere Euris and Finatis were all suspended.


Within the Casino group, dividends from Casino are used to maintain Rallye's debt interest payments, which makes it hard for Casino to reduce its gearing.

The shares of Casino that are held by Rallye are also pledged as collateral to banks in order for Rallye to obtain more financing. So the more Casino's shares fall, the less room Rallye has to manoeuvre.

In September last year, Rallye had bought more time ahead of a key bond refinancing deadline as five banks granted it a new 500 million euro credit line.

Earlier this month Kepler Chevreux cut its rating on Casino stock to "reduce" from "hold" and slashed its price target on the stock, warning that Rallye still faced major concerns over financing issues.

Casino's net debt stood at 2.708 billion euros and that of Rallye at 2.899 billion euros at end-2018.

Shares in both Casino and Rallye have fallen by roughly 20 percent so far in 2019, and their slump on the stock market has drawn the attention of some hedge funds. (Reporting by Dominique Vidalon; Additional reporting by Sudip Kar-Gupta, Blandine Henault and Helen Reid; Editing by Sudip Kar-Gupta and David Evans)