French retailer Casino said on Friday that the filing of its parent company for protection from creditors had no impact on the execution of its strategy and said the majority shareholder remained in control.
Rallye was placed under protection from creditors for at least six months as 70-year old retail kingpin Jean-Charles Naouri battles to shore up the finances of his retail empire.
Casino is Rallye's main asset with a 51.7% stake. Rallye in turn is controlled by Fonciere Euris, Finatis and Euris, all in the hands of Casino chairman and CEO Naouri.
Casino chief financial officer David Lubek told a conference call that Rallye had not lost control over Casino despite the filing for protection from creditors.
Meanwhile short-seller Muddy Waters called the news "a resounding vindication of the warnings we sounded". Casino declined to comment on the statement.
Accounting Structure
In 2015, Muddy Waters criticized Casino's complex structure and accounting practices, saying the supermarket retailer was "dangerously leveraged", and managed for the short-term.
Casino has rejected the criticism in the past.
The group's shares were expected to open down 5-10% once they resumed trading, traders said.
Shares in both Casino and Rallye have fallen by roughly 20% so far in 2019, and their slump on the stock market has drawn the attention of some hedge funds.
Safeguard Procedure
A Paris commercial court on Thursday put Rallye in a safeguard proceeding, granting it a six-month reprieve from its creditors as the firm battled investor concerns over its high debt.
The procedure is intended to allow courts and management to restructure debt and during that period creditors can make no claims nor use or sell collateral.
The court appointed two seasoned bankruptcy proceeding experts Helene Bourbouloux and Frederic Abitbol to oversee the process.
"Mr Naouri has started to lose control of the process and will have to abide by the court's rulings" said Bernstein analyst Bruno Monteyne
Casino, whose credit rating was pushed further into junk status by Standard & Poor's in March and was also downgraded by Moody's in April, has embarked upon asset sales to cut its debt and ease concerns over it and Rallye's position.
Shares in Casino, Rallye, which were suspended on Thursday will resume trading on Friday.
News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.
