Spanish retailer DIA has said that should efforts to stabilise its capital structure and liquidity fail to proceed 'in a timely manner', the company may be forced to file for creditor protection or even liquidation.
The retailer made the statement as it posted a 4.3% decline in like-for-like sales in the first quarter of 2019.
January saw a like-for-like sales decline of 1.6%, February was down 3.2% and March saw sales down 7.9%, due to the Easter calendar effect.
DIA said that the current downward trend in sales is 'primarily driven by the negative impact that the uncertainty surrounding the company’s financial situation has had on our suppliers'.
It said that 'harsh' risk-cutting decisions made by insurance firms have led to a ' level of supplier tightening that started to affect the supply chain, resulting in a substantial increase in out-of-stock levels in our warehouses and stores, which ultimately translated into lower sales'.
Net Loss
DIA reported a net loss of €144.4 million for January-March, in line with a previous estimate it gave in April, of €140-€150 million.
Progress in the bid by Fridman's LetterOne (L1) fund to buy the roughly 70% of the company it does not already own would help stabilise the situation, DIA said in a statement.
It also needs an agreement with financing banks and a capital hike. Without all three elements "the situation could deteriorate rapidly and the company could eventually be forced to file for creditor protection and/or liquidation," it said.
Earlier this year, L1 offered to buy the rest of the company for 0.67 euros per share and try to turn it around.
Deadline Extension
Opposition from some shareholders then prompted L1 to extend a deadline for them to accept the offer until May 13. The market regulator will publish shareholder take-up in the next few days.
L1 has said it is prepared to loan its own funds to rescue DIA, whose 1.7 billion euros in debt and negative equity position have put it at risk of having to declare insolvency.
The offer had originally been conditional upon 50% of the other shareholders accepting its bid, but L1 scrapped this threshold last week.
News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine. Additional reporting by Stephen Wynne-Jones
