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They Did It Again

12 June 2018 by lberuti

As in January 2016 after market concerns about the sustainability of the Rallye/Casino structure which concluded with COFP’s ( Casino Guichard Perrachon SA ) downgrade to non-investment grade, COFP announced yesterday another non-core asset disposal plan to calm the market nervousness of the past few sessions. Last week, its share price dropped by 13% and its 5-year risk premium jumped above 425bps. The company will sell non-core assets – including real estate – worth €1.5Bln to complement the ongoing disposal process of Via Varejo in Brazil. It did not give any details about the breakdown of the assets to be sold, but specified half of the disposals would be completed in 2018, and the other half at the beginning of 2019. The market took the news positively as it confirmed COFP’s deleveraging ambitions, after the surprising cash burn in 2017. The 5-year CDS closed 28bps tighter at 392bps, an impressive performance but meaningfully off the tightest level of the session – it traded down at 360 at some stage -. While some investors were reassured, others are still concerned that “to maintain liquidity, Casino resorts to hollowing out the business through asset sales that destroy the productive value of the company”.