Dia negotiates with the bank to refinance part of the long-term debt before the end of the year | Companies

Dia negotiates with the bank to refinance part of the long-term debt before the end of the year | Companies

Dia wants to start 2019 with a better foot than it is finishing 2018. The bank completes an oxygen balloon in the form of refinancing the debt that guarantees the survival of the supermarket chain, at least, until the expansion of capital planned to take place. this spring. The objective is to sign this commitment with the company as late as December 31.

This oxygen ball will be predictably at least 200 million. The bank is already determined to open the liquidity lines to suppliers for this amount. They were removed between October and November and they were forcing Dia to resort to cash to pay their suppliers, as published Five days. The main plan of the entities is to guarantee with them the viability of the company in the medium term.

The other workhorse is in closing, in addition, the refinancing of a part of the long-term credits, which add up to 900 million. The objective is to send a message to the market and attract potential investors to this capital increase, secured by Morgan Stanley according to certain conditions.

Antonio Coto, the newly elected CEO of Dia after the resignation of Ricardo Currás, put on the table a plan of closures, sales and divestments to turn around the situation of the firm. Among others, the sale of its cash & carry Max Discount and its brand of perfumeries, Clarel, as well as the closing of the most deficit stores.

These divestments were some of the sine qua non conditions that the bank put to Dia when it cut the liquidity lines to reestablish them. Also simplify and adapt your brand portfolio. The bank expects, therefore, guiños of the direction of the company in this sense to approach the long-term financing and begin to glimpse the capital increase that is expected to arrive in the spring. Dia plans to present this future business plan to the market soon, before bringing to the shareholders' meeting the capital increase with which it intends to save the group.

The company itself sits on the side of the negotiation table. On the other, an army of banks. Santander, BBVA, Sabadell, Deutsche Bank and CaixaBank were the financial entities that provided the credit to suppliers to the supermarket chain. The bank chaired by Ana Botín, BBVA, Barclays and Société Générale make up the hard core of long-term creditors. Between both parties is a large group of investors. Dia has hired PwC and Rothschild, while banking is represented by FTI Consulting and Houlihan Lokey. The legal issues are in the hands of Clifford Chance and Linklaters.

Apart from Fridman

The negotiation is advancing at a good pace despite the slamming of last week by Mikhail Fridman, the Russian tycoon who controls 29% of the capital. This investor, advised by PJT Partners, rejected the plan of the company and the bank to carry out this capital increase. And this was evident with the resignation of the directors representing Letterone, the investment arm of Fridman. Dia was forced to renegotiate its liabilities with the creditors after rethinking its 2017 accounts and revising downwards its forecasts for this year and the next. Something that made commitments to banks (covenants) jump through the air. Sources consulted by CincoDías expect that Dia's EBITDA in 2018 will be 360 ​​million, about 4 times its debt.

The renegotiation with banks of both liquidity lines and long-term debt is key for rating agencies to relax their pressure on the company. Both Moodys and S & P have progressively degraded the note of Dia to sink it in Caa1 and CCC +, several steps below the degree of investment. To improve the rating, both agencies consider key to stabilize the ratios and improve their capital structure. Specifically, S & P conditioned a rating upgrade to the refinancing of its debt and to launch a new business plan, according to a report published last week.


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