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Banks To The Rescue

17 September 2018 by lberuti

As you can see on the above grapple, investors suspected RALFP’s ( Rallye SA ) management would not sit on their hands and would react to the vicious recent price action of the company’s risk premium. COFP’s ( Casino Guichard Perrachon SA ) parent company announced over the week-end that it had signed a new bank credit line of 500M€ with five banks maturing in June 2020. More importantly, to draw down from this new credit line, RALFP does not need to pledge shares of COFP as collateral. For now, this new financing may resolve the liquidity issue RALFP would otherwise be facing in March 2019 as, depending on COFP’s share price, drawing on cheaper existing collateralised credit line might not be a possibility. Overall, RALFP has gained time and successfully closed the door on the talk of immediate default or debt restructuring – RALFP’s bond maturing in 4 weeks which was offered at 95% of face value last week was bid at 99.5% today. However, if bank financing is a good short-term option, it is not a long-term solution. The company has obviously reassured credit investors, but it will need to access the bond market at some point and it will not be able to do so unless it resolves its indebtedness issue.