A group of bondholders, led by GLAS and including BlackRock and an affiliate of Carlyle, has become the top shareholder in French fashion company SMCP. This comes as a subsidiary of SMCP’s majority owner, Shandong Ruyi, defaulted on some bonds, raising questions about the ownership structure of the company.

The bondholder group now holds a 29% stake in SMCP’s equity and 22.3% of its voting rights. Following this news, SMCP’s shares saw a 3% increase in value.

Despite the change in ownership, SMCP assured investors that its financing and operations remain unaffected by the situation. However, the bondholder group intends to make changes to the company’s board.

Shandong Ruyi previously held a 53% stake in SMCP and controlled 67% of its voting rights through its subsidiary, European TopSoho. However, with European TopSoho defaulting on €250 million worth of bonds, Shandong Ruyi’s stake in SMCP has decreased to 24%, but it still maintains 37% of the voting rights.

Adding to the complexity, European TopSoho has initiated legal proceedings against the bondholders, accusing them of trying to gain control of SMCP at an undervalued price.

Shandong Ruyi, a Chinese conglomerate, had previously aimed to challenge luxury giant LVMH through acquiring various fashion brands. However, its acquisition spree left it with significant debts, which were further worsened by the impact of the COVID-19 pandemic. Last year, Shandong Ruyi failed to secure financing for a $600 million deal to purchase Swiss brand Bally.

Despite these challenges, SMCP remains optimistic about its performance. The company recently announced its confidence in achieving €1 billion in sales for the full year. SMCP’s revenues in the third quarter showed strong recovery, approaching pre-pandemic levels. This follows a 24% decline in sales the previous year.

The emergence of this bondholder group as the top shareholder in SMCP highlights the difficulties faced by Shandong Ruyi and its implications on the ownership structure of the company. Stakeholders in the fashion industry will closely monitor the developments within SMCP and its popular brands, Sandro and Maje.

Useful links:
1. SMCP official website
2. Reuter’s article on SMCP bondholder group