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French lenders nursing huge losses on loans to retail giant

London

CREDIT Agricole SA and Natixis SA are among French lenders nursing losses on loans made to Rallye SA and other parent companies of retailing giant Casino Guichard-Perrachon SA, which are creaking under more than 3 billion euros (S$4.6 billion) of debt.

Natixis made a provision for credit losses of 110 million euros in the second quarter because of its loans to Rallye, which filed for creditor protection in May, according to a person familiar with the matter.

Credit Agricole added 69 million euros to cover soured debts at the division that houses corporate and investment banking mostly because of the exposure to the same company, according to a separate person. The people asked not to be named because the matter is private.

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Representatives for the lenders declined to comment.

This is the first tangible impact of Casino group's troubles on its lenders. For years, banks have been lending to the holding companies of Casino, allowing founder Jean-Charles Naouri to keep control of the business.

The retailer's struggles against new market entrants and a mistimed expansion in South America weighed on its profitability and ability to repay the debt, eventually forcing the holding units to file for creditor protection.

Rallye, the largest of these firms, had 1.8 billion euros of bank loans outstanding at the end of June, of which 210 million euros are unsecured.

Casino also told investors last month Rallye and other parent companies have an additional 323 million euros of structured financing arrangements secured by share pledges. Societe Generale SA won a court ruling in Paris last month that allows it to call on the pledge even if Rallye is under creditor protection.

Societe Generale's net cost of risk rose to 314 million euros in the second quarter because of a number of troubled corporate loans, including those to Rallye, a separate person familiar said.

A spokesman for the bank said that the company's cost of risk stayed at a low level, with a limited impact stemming from a few specific situations. He declined to comment on individual clients. BLOOMBERG