Entering the Casino

All,

We are taking a 5% of NAV position in the Casino 21s for a 12.7% YTM to benefit from a string of positive events we see unfolding at Casino. We are also taking a small 1% position in the Rallye 22 converts. Please find our updated analysis here.

Clearly the Casino position runs the risk - among others - that Casino itself will have to enter Sauvegarde. But even in such a case we would be comfortable from a liquidity and LTV (~50%) perspective as well as considering the creditor dynamics in such a sauvegarde.

As regards Rallye, the risk is primarily that all the banks are secured over the shares (via some mechanism that is not yet public) or that they can assert their position to that degree. Still, in that case the bonds would have nuisance value - particularly to Naouri - and thus we don’t believe the bonds are too far away from their downside scenario) as all participants (except the bonds if the banks are not fully secured) will want to avoid a Redressement Judiciaire.

Wolfgang