DIA: Capital increase in the works? (Bankinter Securities)
Very worrying news today.
Today, the press reports that banks have cancelled reverse factoring lines to DIA, to the tune of €200mn. As of 1H18 DIA had a limit of €586mn, of which it had used €370mn. If the news is true, this cancelation would leave DIA little room to delay its payments to suppliers through financing mechanisms.
If there is no capital increase soon, DIA could go bust.
This news could alarm DIA’s suppliers. If they believe that the company would not be able to honour its payments, suppliers could either demand payment on delivery, thus crippling DIA’s main tool for return on capital, which is its negative working capital business model, or deny supply at all. If DIA’s shelves stop being replenished of important items, consumers could stop visiting the stores altogether, triggering a vicious circle from which the brand could not recover.
Distribuidora Internacional De Alimentacion is a supermarket and convenience store group based in Spain. Co. is engaged in the retail trade of food through cut-price self-service supermarkets and franchise establishments. Co. is engaged in the operation of stores located in Spain, France, Portugal, Turkey, Argentina, Brazil and China.
Bankinter S.A. is a Spanish brokerage firm established in 1989. The company's line of business includes the provision of market research and trading services for Equity and Fixed Income products.
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