Casino - cash in account, now for more buybacks
All,
Please find our analysis here.
We maintain our 2% of NAV long position in the 2023 bonds and the completion of the Leader Price sale to Aldi paves the way for further buybacks prior to year-end. Casino completed the sale yesterday receiving €648m of cash yesterday, in line with our expectations. We were surprised that more bonds were not tendered into the offer by Casino earlier this month, but we are convinced that Casino will attempt further buy-backs prior to year in order to meet their year-end Gross Leverage covenant on the (undrawn) RCF.
As a recap, Casino announced that they purchased €222m of face bonds via their tender process in early November. This is less than the maximum of all of the 2021 plus €150m of the 22, 23 and 24 bonds. We expect there will be another round of tender prior to year-end in order to meet the Gross leverage covenant requirement. The Company are required to get Gross leverage at the French level down to 5.75x, which depending on EBITDA assumption is c. €4.7-4.8bn at the France Retail and E-Commerce level. After this transaction, Gross Debt via the bonds at Casino France totals €4,884m, to which debt at Segisor (c.€190m) plus Commercial Paper (€200-300m) plus E-Commerce Gross Debt (c. €300m) has to be added. This implies Casino need to buy back c.€700-€1bn of further debt by year-end.
The sale of Leader Price also involved the transfer of €34m of net liabilities plus the potential to receive further monies, upto €35m depending on performance over 2021. This sale does not include the 200 franchise Leader Price stores and Casino will continue to supply these stores going forward.
This level of buyback might be at the high end of model, with EBITDA likely to beat prior year into year-end. However, with the Leader Price transaction closed with €648m of proceeds to make further debt purchases prior yo year-end.
Happy to discuss.
Tomás
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