(News Bulletin 247) – The Financial Markets Authority has requested this fine against the parent company of Casino for disseminating false or misleading information.

The troubles are piling up for Casino, which is fighting for its survival: the Autorité des marchés financiers on Friday demanded a fine of 27.5 million euros against its parent company Rallye because of “false or misleading” communications on its debt between 2018 and 2019.

The representative of the College of the Autorité des marchés financiers (AMF) criticizes Rallye for having “artificially reassured” investors between March 2018 and May 2019 by saying that the company had financing, while conditions precedent applied to these lines of credit and could therefore lead to their partial unavailability.

Rallye was under strong pressure from investors on its debt, attacked by short sellers, and ended up in May 2019 by requesting its placement in safeguard proceedings.

The representative of the AMF College, Anne-Claire Hercot-Le Bihan, denounced during a session of the Authority’s sanctions committee “an unprecedented concealment”, with “factors of seriousness and intention very strong” who do not suffer “from any exculpatory circumstances”.

Thus, between 400 and 600 million euros of liquidity displayed by Rallye are in reality not available to the AMF depending on the period, a difference which almost all of the defense lawyers contest.

“The financial situation of Rallye”, currently in great difficulty, “is not [la seule] to be taken into account” for the sanction, justified the representative, who therefore asked for “an exemplary sanction”.

The Financial Markets Authority is claiming 25 million euros from Rallye and 2.5 million from Franck Hattab, its managing director.

Rallye is the holding company through which Jean-Charles Naouri controls the distributor Casino, which has been trying for several weeks to survive its colossal debts.

Riddled with nearly three billion euros in debt, Rallye constantly assured the markets during the period in question that its liquidity situation was “solid” or “very solid” whereas it was, according to the rapporteur of the case, “extremely fragile”.

Conditional loans

Debt repayment being the main issue on Rallye, its publications manipulated the market by participating in fixing the price of the action “at a level higher than it would have been in the absence of the dissemination of false information and misleading” according to the rapporteur.

Rallye presented, on the occasion of its annual or half-yearly results, or other financial communications, the assurance of being able to mobilize financing in full, while restrictive conditions were provided for: eight loans are concerned, including a loan at amount of 300 million euros by the bank UBS which was only very little mobilized due to conditions not disclosed to the market and concerning insurance against Casino’s debt (CDS) according to the rapporteur.

“The line of credit is not unavailable, that is not true. The cost of its availability”, not known by the market, “is marginal and the impact” of taking this cost into account would have been ” negligible”, assured the lawyer for Rallye.

Other examples, according to the AMF, Rallye did not say that loans of 500 million euros by several French banks in September 2018 should be repaid early, in the event of the sale of stores, such as the Courir brand, while that the markets believed that the money from the disposals would add up to the financing of the loans.

“At the material time, our belief is that the communication had the appropriate format” defended Franck Hattab’s lawyer. “The ability to meet our 12-month maturities was justified,” he also said.

National Financial Prosecutor’s Office

Rallye’s safeguard plan was validated in February 2020 for a debt spread over 10 years, since extended due to the Covid-19 crisis.

But since then, Casino is crumbling under the weight of its 6.4 billion euros in debt.

Two takeover offers were submitted on Tuesday, by the billionaire duo Daniel Kretinsky and Marc Ladreit de Lacharrière, on the one hand, the trio Xavier Niel, Matthieu Pigasse and Moez-Alexandre Zouari, on the other.

In any case, Rallye will lose control of Casino, the company has warned.

In addition, another investigation has been opened by the National Financial Prosecutor’s Office (PNF) for alleged acts of “price manipulation in an organized gang, active and passive private corruption” and “insider trading committed during 2018 and 2019”.

The Sanctions Committee will make its decision in several weeks.

(with AFP)