Belvédère needs to wrap up the sale of Marie Brizard, and soon, or market jitters could spell serious problems.
Belvédère’s share price has slumped by 18% since it emerged yesterday (21 September) that a French court has told the firm to pay back EUR375m (US$496.7m) of debt quicker than previously expected. Investors are clearly nervous about the group’s prospects.
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The Sobieski vodka maker has a ten-year plan to repay debt as part of a deal with the courts to allow it to emerge from bankruptcy protection. But, there are less than two months before the first tranche of debt is due for repayment and the firm has yet to announce the sale of its Marie Brizard subsidiary, which is central to funding the debt plan.
While Belvédère said this month that it would meet its first scheduled debt payment of EUR39m on 10 November, the sooner the Marie Brizard deal is sorted out, the better. A sale would at least help to calm investor and shareholder nerves.
The firm’s self-imposed 10 September deadline for an announcement on Marie Brizard has passed and there is little clarity surrounding the process. Earlier this year, Belvédère said it was in exclusive talks with COFEPP, the parent company of French group La Martiniquaise, for the sale of Marie Brizard. Yet, Belvédère said on 9 September that it was in talks with a new prospective buyer.
Nerves are fraying the group’s share price, because Belvédère has repeatedly said that asset disposals and cash generation will be its principal vehicles for debt repayments that are set to total EUR781.5m, including interest, over ten years.
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By GlobalDataFrench media have estimated Marie Brizard’s sale price at EUR185m (US$232.9m), but this has not been confirmed by Belvédère.
The firm has this month secured an equity line of EUR70m from US-based Global Emerging Markets Group that can be used over the next three years. It is anticipated that this will help to meet the initial debt payment on 10 November.
Before that, the firm needs to survive an extraordinary general meeting that has been triggered by its failure to meet minimum capital requirements. Shareholders will be asked on 22 October whether they wish to see the group dissolved. While they are highly unlikely to favour this avenue, the mere possibility highlights the precarious nature of the firm’s position.
Group net sales have, at least, shown greater stability of late. Sales for the first six months of 2010 fell by 3% on an organic basis, although currency gains ensured a 2% rise on the same period of 2009, to EUR175.8m.
The one silver lining through all this is ongoing volume gains for Belvédère’s flagship brand, Sobieski vodka. Sobieski rose to sixth place from 14th on the latest list of ‘elite brands’, published this week by drinks research group IWSR. The vodka had volumes of 2.7m cases last year and a compound annual growth rate of 13.3% between 2004 and 2009.
US Hollywood actor Bruce Willis has acquired a 3% stake in Belvédère and has become heavily involved in pushing Sobieski in the key US vodka market. Sobieski volume sales doubled in the US in 2009, to 576,000 nine-litre cases, even though Belvédère’s ability to invest remained shackled by its bankruptcy protection order in France.
Belvédère is going to need some ‘Die Hard’ spirit in the weeks and months ahead.
