A plan for French company Picard to issue more bonds in order to pay dividends to its shareholders, Swiss Irish food company Aryzta and Lion Capital, has been described as "opportunistic" by ratings company Fitch.
Picard completed a debt refinancing in December 2017 allowing the group to repay its existing debt. It also included an exceptional €110m dividend distribution to the shareholders, which gave a much-needed boost to Aryzta's coffers.
The bond included a clause which permitted a so-called tap issue, which allowed more funds to be raised in certain circumstances.
In a pointed note Fitch said: "Picard Groupe SAS's planned tap issue to fund an additional dividend distribution to shareholders highlights the opportunistic behaviour of the retailer's owners, ie Lion Capital (49.7pc owner) and Aryzta AG (48.7pc), evidenced by increasing debt to enhance shareholders' returns, thus taking the maximum advantage of the company's inherently cash-generative business model."
It said that under the original terms of the €1.19bn floating-rate notes, there was room for a dividend payment to be made if Picard's debt ratio remained below a certain level. "Such leverage threshold has been met to date, leading to the proposed dividend distribution," said Fitch.
Investors have been closely watching Aryzta's own debt levels to ensure the embattled company does not breach its banking covenants.
Aryzta, led by Kevin Toland, received around €35m from the tap issue in addition to €53.5m received from Picard in the first half of its financial year. Some analysts believe that this has allowed the company to stay below covenant thresholds.
In May, Aryzta issued a fresh profit warning when the company said full-year ebitda (earnings before interest, taxation, depreciation and amortisation) would be 9pc-12pc lower than previous expectations.
The share price was hit further by a downgrade last week from Credit Suisse which suggested the company may be "forced" to sell assets.