What creditors should know about the Rallye holding companies Safeguard Proceedings and how the holdings of the Casino Group are likely to restructure its average €3bn financial indebtedness

On 23 May 2019, the Paris Commercial Court placed Rallye SA and its direct and indirect holding companies and two affiliates, the Casino group’s parent holding companies, under Safeguard Proceedings (Procédure de Sauvegarde).

On 23 May 2019, the Paris Commercial Court placed Rallye SA and its direct and indirect holding companies and two affiliates, the Casino group’s parent holding companies, under Safeguard Proceedings (Procédure de Sauvegarde). Finatis SA, Foncière Euris SA, Rallye SA and Casino SA are publicly traded entities in France their listing was following issuers requests on that same date.

For an overview of the Casino group’s structure based on public information:

Financial indebtedness of Rallye SA is estimated at €2.9bn for Rallye, €180m for Foncière Euris, €104m for Finatis and €12m for EU, giving a total of €3.3bn. No information has yet been provided on the subsidiaries’ debts.

When the procedure was announced, Rallye public cotation dropped by 61.8% v. a 20% rise for Casino SA’s listing.

Bondholders are particularly exposed by the opening of this procedure, RALLYE’s bond debt was estimated at €2,877m on December 31, 2017. They could face a debt restructuring proposal suggesting a major write-off or a forced court term out of their debt up to 10 years with progressive amortisation the first three year could cumulate less than 15% of such debt.

Rallye’s website indicates that the bond maturity can be broken down as follows:

The Judicial Administrators appointed in this proceeding are FHB (Me Hélène Bourbouloux) and FAJR (Me Frédéric Abitbol) who are familiar with large group restructurings with important complex financial structure including bond debt. They will assist the debtor in the drawing up of the safeguard plan. At his side, there is necessarily a creditors’ representative in charge of collecting statement of claims Selafa MJA (Me Valérie Leloup-Thomas) was appointed by the court to this effect.

The Safeguard Proceedings have been opened for a six months period of observation period (up to 23 November 2019), renewable twice for a total maximum period of eighteen months.

Debtors eligible to Safeguard Proceeding must not be insolvent (within the meaning ascribed to such concept under French law) at the time of the judgment opening the proceeding (ie 23 May 2019 in such instances).

Main safeguard’s effects are the freezing of all past due receivables and the stay of individual legal proceedings against the debtor, culminating in prohibition of (i) acceleration do debt and enforcement of security interests and (ii) payment of any claim arising prior to the opening judgment.

Declaration of claim must be made within two months of the publication of the opening judgment (four months for creditors outside France). The debtors will have declared such indebtedness when filing the Safeguard Proceeding, it is an opportunity for creditors to set the amounts due to them in particular in case of discrepancy between what they have on their records and what was declared by the debtor, creditors will need to provide evidence in support of their own declaration.

During the observation period, the debtor, assisted by the Judicial Administrators, will negotiate with its creditors through creditor’s committees: (i) credit institutions and related institutions committee (bank debt creditors), (ii) main suppliers of goods or services committee (trade creditors) and (iii) bondholders in a single general assembly irrespective of the various bond issues.

The purpose of these committees is to be consulted with respect to the debtor’s proposed safeguard plan. Such plan may propose waiver of debt, change in payment terms, new credits, conversion of claims into capital, differential treatment between creditors if objective differences justify it. Members of the creditors’ committee may also present their own alternative safeguard plan. Other creditors who are not members of creditors’ committee are consulted individually.

Submission of the safeguard plan is governed by the French law within very strict and short deadlines.

The committees, after discussions with the debtor and the Judicial Administrators, must decide on the safeguard plan. For majority calculation, decision shall be taken by each committee by a two-thirds majority of the amount of claims held by the members having expressed a vote.

Absence of a favourable vote by creditors’ committees requires the use of the ordinal procedure for consulting creditors: individual consultation.

Thus, there are three main possible outcome of Safeguard Proceeding:

  • conversion in recovery proceeding or liquidation
  • partial disposal of the activity, and
  • adoption of the safeguard plan.

To date, although French law provides the possibility for creditors to suggest alternatives to the safeguard plan sponsored by the debtor, no procedure of such magnitude has seen lenders led alternative safeguard plan.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.