PARIS (Reuters) – Shares in French retailer Casino slumped by just over 16% on Friday, in their worst day on record, after rating agency Moody’s cut its long-term debt rating further into junk territory, citing market share losses, weak liquidity and high debt.
The stock hit a record low of 5.57 euros ($5.99) before regaining some ground to close at 5.625. Shares in Casino’s (PA:CASP) parent company, Rallye, also shed 16.1%.
The cost of Casino’s five-year credit default swaps – a form of insurance for bondholders – rose to 66.125 basis points from 65.125 at Thursday’s close, according to S&P Global (NYSE:SPGI) Market Intelligence.
Moody’s said the downgrade of several of Casino’s credit ratings reflected continued market share losses in the French retail market, with a reduction in retail margins for last year, and negative free cash flows in its home country.
“The company continues to burn cash with negative free cash flow in France of around 900 million euros in 2022,” Moody’s said.
Casino also will have to rely on the proceeds from its ongoing asset disposal plan to repay upcoming debt maturities.
“Casino still has to refinance or repay around 1.2 billion euros worth of outstanding notes by 2024 and a further 1.8 billion euros worth of outstanding debt in 2025. Moody’s expects Casino will repay 2024 maturities through asset disposals,” the agency said.
Casino declined to comment.
The company is in exclusive talks to combine its French retail business with smaller food retailer Teract as it seeks to reassure investors over its ability to generate cash and reduce debt. Earlier this month it sold down its stake in Brazilian supermarket chain Assai.
Moody’s said the asset sale program to cut debt meant Casino was reducing its geographical diversification and thus increasing its exposure to the French market.
“Moody’s expects Casino to struggle to maintain its sales volumes in 2023 as inflation remains high, consumer confidence remains low and competition in the French market is fierce.”
GRAPHIC: Casino shares sink https://fingfx.thomsonreuters.com/gfx/mkt/znvnblqbyvl/casino.PNG
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($1 = 0.9306 euros)
