Russian tycoon Mikhail Fridman's investment fund LetterOne (L1) said on Friday it had won control of Spain's DIA but had not secured support from all of the loss-making retailer's creditors with three days to go before a financing deadline.
DIA's inability to compete with domestic and foreign rivals who invest heavily in their stores has led to a haemorrhage of market share and put it at risk of having to declare insolvency.
L1's bid, launched in February of this year, to buy the roughly 70% of DIA it did not own was eventually accepted by holders of 29.4% of its capital, giving L1 a 58.4% stake.
The fund said it had reached agreement in principle to prop up DIA's capital with 16 of its 17 lenders, which hold 77.5% of its €912 million syndicated bank debt.
Refinancing Plan
But it needs all of its creditors to agree a refinancing plan by 20 May to go ahead with a planned €500 million ($558 million) capital hike to remedy its negative equity position.
Creditors led by Spanish bank Santander are being asked to extend debt agreements until 2023 and set up new credit lines for €170 million. DIA also needs cash to help honour its €1.7 billion in debt.
Failure to convince the holdout bank, which L1 did not name, could stymie the plan. L1 said in its offer prospectus it would consider using its own funds through a shareholder loan if fellow shareholders backed its bid but it did not repeat this on Friday.
DIA's shares rose 3% in early trading but were 2% lower by late morning.
Its short-term debt costs increased, with the yield on bonds maturing in July 2019 climbing 2.47%.
Resistance From Shareholders
After bidding on 5 February to buy the rest of DIA for €0.67 per share, L1 faced resistance from some shareholders, extended the deadline and reduced the minimum acceptance level, before scrapping that condition altogether.
DIA reported a first quarter loss on Tuesday as sales fell.
L1 has criticised DIA's management and touted its team's experience in retail, including its purchase of British health food chain Holland & Barrett in 2017.
DIA has proposed its own turnaround plan, saying it could improve core earnings as early as next year by focusing on its own-label goods, offering more fresh produce and promotions, and cutting about 1,500 jobs.
News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.
