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French retailer Casino's shares fall after Moody's downgrade

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By Reuters
French retailer Casino's shares fall after Moody's downgrade
FILE PHOTO: A customer shops in a Casino supermarket in Nice, France, January 15, 2019. REUTERS/Eric Gaillard/File Photo   -   Copyright  Eric Gaillard(Reuters)

PARIS (Reuters) – Shares in French supermarket retailer Casino, which is battling to tackle concerns over its debts, fell on Wednesday after credit rating agency Moody’s cut its ratings on Casino, citing concerns over weak cash flow generation.

Casino shares were down 2 percent in early session trading.

Late on Tuesday, Moody’s cut Casino’s long-term rating to ‘Ba3’ from ‘Ba1’ and kept a negative outlook on the company.

“The free cash flows generated by Casino’s French operations fell well below Moody’s previous expectations, limiting the company’s ability to reduce its gross debt despite large asset disposals,” said Vincent Gusdorf, the lead analyst for Casino at Moody’s.

“Our decision also reflects the weakening liquidity and persistently high leverage of parent Rallye, which creates substantial uncertainties with regards to Casino’s future financial policy, despite some protections stemming from Casino’s listing and large minorities,” he added.

Casino said in a statement on Tuesday that Moody’s decision did not factor in Casino’s ongoing asset sales and debt-cutting plan, and added that it was focused on meeting its strategic and financial targets for 2019-2021.

Casino, which already had its credit rating cut to junk by Standard & Poor’s in March 2016, has embarked upon asset sales to reduce its debt and ease concerns over the financial position of both Casino and its parent holding company Rallye.

Last month Casino raised its goal for the disposal of non-strategic assets to at least 2.5 billion euros (£2.1 billion) to be achieved by the first quarter of 2020.

Bernstein analyst Bruno Monteyne wrote in a note on Tuesday that he shared Moody’s concerns over Casino’s free cash flow.

“We do not feel Casino is structurally any better following their disposal plan…While asset disposals provide short-term liquidity there will be a point beyond which the company will be hollowed out too much or they will have run out of assets to sell,” said Monteyne, keeping an “underperform” rating on Casino’s shares.

(Reporting by Sudip Kar-Gupta; Additional reporting by Dominique Vidalon; Editing by Michel Rose)