SMCP Says it's Safe as Struggling Parent Worries Investors
By Joshua Kirby
SMCP SAS said a possible default by its main shareholder won't
affect it, after minority investors in the French fashion group
voiced concerns over the future of the company under Chinese parent
Shandong Ruyi Technology Group, which has struggled with debt
In a letter dated Sept. 13 and addressed to recently appointed
Chief Executive Isabelle Guichot, shareholder representative
Fabrice Remon raised the issue of convertible bonds worth 250
million euros ($295.4 million) due for repayment by a
Luxembourg-based subsidiary of Shandong Ruyi, a company called
European TopSoho. It holds just under 54% of SMCP's capital,
according to FactSet. "The situation is alarming for the future of
SMCP, its minority shareholders, its employees and all other
stakeholders," Mr. Remon said in the letter, which was also sent to
the French capital-markets authority.
Mr. Remon also raised concerns over SMCP's share price, which
has fallen from EUR22 at the company's listing in 2017 to EUR5.65
as of Friday morning. Mr. Remon suggested that this has to do with
fears over the future of Shandong Ruyi, "and the measures it might
take regarding SMCP in order to protect itself."
In response, SMCP told The Wall Street Journal that the group
has its own strategy and resources, and that its financial
situation is "very healthy." SMCP had EUR240 million in cash as of
the end of June, and recently returned to positive operating
earnings, the company said.
Mr. Remon meanwhile noted that following the 2018 issue of the
bonds, which are exchangeable for shares in SMCP, European TopSoho
paid a dividend worth a total EUR176 million, instead of
reinvesting the proceeds into SMCP. In its response, SMCP said it
had undertaken to not pay any dividends as a condition of taking a
state loan in the context of the coronavirus pandemic.
"SMCP is always committed to listening to its shareholders," the
company said, adding that Ms. Guichot had responded to the
investors' letter, reiterating her commitment to continuing
profitable growth at the group.
Shandong Ruyi has struggled financially after buying up fashion
businesses including Swiss apparel maker Bally and U.S. activewear
firm The Lycra Co., as well as SMCP. In late 2019, Moody's
Investors Service cuts its credit rating on the company, putting it
deep in "junk" territory. More recently in June, Moody's said
Shandong's rating reflected its high refinancing risk, with large
amount of upcoming maturities, weak liquidity and limited progress
on refinancing plans.
Shandong Ruyi Technology Group and European TopSoho didn't
respond to requests for comment.
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(END) Dow Jones Newswires
September 17, 2021 06:30 ET (10:30 GMT)
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