(3x3)rd time’s the charm?
Ninth question leads to another look at Casino’s CDS
Things are looking a bit default-ier for French supermarket Casino.
Moody’s said Friday that more than 30 days had passed since a payment was due on €400mn of bonds maturing in 2026, meaning the grace period for a payment has expired:
Moody’s Investors Service (Moody’s) has today appended a limited default (LD) designation to Casino Guichard-Perrachon SA’s (“Casino” or “the company”) probability of default rating (PDR), changing it to C-PD/LD from C-PD. All other ratings are unaffected. The outlook is negative.The “/LD” indicator reflects a payment default, following the expiration of the thirty-day grace period on the coupon payment that was due on 17 July 2023 in relation to the company’s €400 million backed senior unsecured notes due in January 2026. The “/LD” indicator reflects that the payment default on a selected debt instrument qualifies as a limited default under Moody’s definition of default, which is intended to capture events whereby issuers fail to meet debt service obligations outlined in their original debt agreements.
OK, so the “appended a limited default designation” that hasn’t affected the company’s other ratings?
More importantly, is this apparently missed payment a default that would meet the standard of becoming a real-life Credit Event and trigger a CDS payout? The Determinations Committee decided Monday to consider the question, but no decision has yet been announced at pixel Tuesday (early morning UK time). A company can miss an interest payment scheduled during the bond’s original sale and still not technically be a “Credit Event”, of course.
But the statements out there about whether this would qualify as a missed payment — and whether the note holders agreed to forbearance — are rather confusing.
From July 3:
Holders of the Senior Secured Notes issued by [Casino subsidiary] Quatrim have agreed to, for the duration of the conciliation proceedings, waive any default, event of default or cross-default arising from the herein-mentioned suspension of payments.The corresponding waiver was however not obtained from holders of CGP’s Senior Unsecured Notes due 2026 and 2027. As such, a cross-acceleration may be triggered under these notes in the case of a suspension of payments of debts which outstanding principal amount exceeds 40m€. Further, such holders did not agree to forbear from exercising any of their enforcement rights in relation to the non-payment of interest due to them under their notes (consisting of approximately €12mn and €14mn due respectively on July 15 and October 15) for the duration of the conciliation proceedings. Similarly, the holder of the bonds issued by Monoprix Exploitation responded negatively to the conciliators’ requests.The Group will therefore request from the President of the Commercial Court, in the coming days, the application of délais de grâce pursuant to article L. 611-7 of the Commercial Code. For the other groups of creditors, a reply to the conciliators’ (conciliateurs) requests is expected in the next few days. The creditors’ replies, received or to be received, do not have any impact on the continuation of the conciliation proceedings.
Unless we’re seeing things, that seems to contradict a company report from early June that was published under the two ISINs for the company’s unsecured bonds due in 2026 and 2027. (The Quatrim bonds mentioned above appear to mature in 2024.)
Interesting! Also: On average, from March 25 through June 23 of this year, there was daily notional trading volume of around $50mn in Casino’s CDS, with 16 trades per day, according to the DTCC. That compares with trading volume of $23mn and 4 trades each day, on average, for the 1000 borrowers with the most active CDS markets.