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Rating action

Scope Ratings GmbH (Scope) has today downgraded the issuer ratings on Casino, Guichard-Perrachon S.A. (Casino) and on its guaranteed subsidiary Quatrim S.A.S. to CC from B and maintained the issuer ratings under review for a possible downgrade. Scope has also downgraded the senior unsecured debt rating to C from B-, the senior secured debt rating to CC from B+ and the subordinated (hybrid) debt rating to C from CC. Scope has maintained all long-term debt category ratings under review for a possible downgrade. The S-4 short-term debt rating has also been placed under review for a possible downgrade.

Rating rationale

The downgrade is driven by the conciliation launched by Casino on 26 May 2023 to negotiate a debt restructuring with creditors which is highly likely to result in a material reduction of Casino’s debt through ways including a swap to equity or a distressed debt exchange. The opening of the conciliation follows a press release published on 24 April 2023 and indicating that the Group has been offered a EUR 1.1bn capital increase from EP Global Commerce a.s. (controlled by Daniel Křetínský). This capital injection would require a significant decrease in senior unsecured debt through bond buybacks and/or debt-to-equity swaps for certain outstanding debt obligations.
 
The downgrade reflects Scope’s view on the high likelihood that following the conciliation, Casino’s debt will be materially reduced with ways including swap to equity or distressed debt exchange. The conciliation concerns financial debt issued by Casino, Guichard-Perrachon and its French subsidiaries , including senior secured debt (Term Loan B and 2024 secured bond), senior unsecured debt (2024, 2025, 2026, 2027 bonds) and perpetual notes. Another option could be to repurchase senior unsecured bonds at deep discount in the open market to allow Casino to deleverage at a reduced cost. The exact recovery of the debt instruments remains uncertain, given that Casino’s group structure could significantly change through potential asset disposals in Latin America and France, the future merger with Teract and the partnership with Les Mousquetaires. Proceeds from asset disposals would be used to repay upcoming maturities issued by Casino, Guichard-Perrachon. The timeline of these transactions is pending.
 
If creditors agreed on a debt restructuring such as through a debt-to-equity swap, Scope would likely regard this as a distressed debt exchange aimed at avoiding a default of the company. In this instance, creditors’ initial claims would face diminished value compared to the original terms.

Under review

Scope expects to resolve the under-review status as soon as the conciliation is finalised. Scope will closely follow the developments related to the negotiations between Casino and its creditors regarding a potential debt restructuring.

A positive rating action is deemed as remote but could be justified if a capital increase improved the financial structure to a large extent while avoiding debt restructuring.

A rating confirmation could be considered if Scope received sufficient transparency that Casino’s financial strength did not deteriorate any further.

A rating downgrade could be triggered in the event of any distressed debt exchange/restructuring.

Long-term and short-term debt ratings

Along with the downgrade and extension of the under-review status on Casino, Guichard-Perrachon S.A.’s and Quatrim S.A.S.’s issuer ratings, all long-term debt ratings have been downgraded and remain under review for a possible downgrade.

Scope has downgraded the rating on senior unsecured debt issued by Casino, Guichard-Perrachon S.A. to C from B- and maintained the rating under review for a possible downgrade.

The rating on senior secured debt issued by Casino, Guichard-Perrachon S.A. or Quatrim S.A.S. has been downgraded to CC from B+ and maintained under review for a possible downgrade. The senior secured debt rating has been downgraded to CC, in line with the issuer rating pertaining to the potential that also such debt positions could be subject to a debt restructuring resulting in material haircuts.

Scope has downgraded the rating on subordinated (hybrid) debt issued by Casino, Guichard-Perrachon S.A. to C from CC and maintained the rating under review for a possible downgrade.

Lastly, the S-4 short-term debt rating has been placed under review for a possible downgrade.

Stress testing & cash flow analysis
No stress testing was performed. Scope Ratings performed its standard cash flow forecasting for the company.

Methodology
The methodologies used for these Credit Ratings and/or Outlooks, (General Corporate Rating Methodology, 15 July 2022; Retail and Wholesale Rating Methodology, 27 April 2023), are available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at https://scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
The Outlook indicates the most likely direction of the Credit Ratings if the Credit Ratings were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
The following substantially material sources of information were used to prepare the Credit Ratings: public domain, the Rated Entity and Scope Ratings' internal sources.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting the Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and/or Outlooks and the principal grounds on which the Credit Ratings and/or Outlooks are based. Following that review, the Credit Ratings were not amended before being issued.

Regulatory disclosures
These Credit Ratings and/or Outlooks are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and/or Outlooks are UK-endorsed.
Lead analyst: Thomas Langlet, Associate Director
Person responsible for approval of the Credit Ratings: Sebastian Zank, Managing Director
The Credit Ratings/Outlooks were first released by Scope Ratings on 11 January 2022. The Credit Ratings/Outlooks were last updated on 6 April 2023.
 
Potential conflicts
See www.scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings.

Conditions of use/exclusion of liability
© 2023 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH, Scope Investor Services GmbH, and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5 D-10785 Berlin.