GPA has been struggling with poor earnings and declining sales. Credit: T. Schneider via Shutterstock.

In a bid to address its growing debt, Brazilian retail giant Cia Brasileira de Distribuição (GPA), known for its extensive grocery store chains, has successfully secured $704m reals ($142m) through a primary equity offering, Bloomberg reported.

GPA priced the shares at $3.20 reals each, representing a slight discount of approximately 4% compared to the previous closing price.

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The offering involved selling 220 million shares, with the proceeds specifically directed towards reducing the company’s debt, which stood at a considerable $2.3bn reals at the end of 2023.

GPA has been struggling with weak earnings and declining sales, resulting in this net loss, the news agency stated.

The company has already initiated asset sales of non-core holdings and is exploring the potential offloading of its gas station networks and headquarters in an effort to improve its financial situation.

According to Bloomberg, investment bank UBS believes this capital raise, coupled with GPA’s ongoing asset sales, could significantly improve the company’s capital structure.

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However, it acknowledges the potential dilution of existing shareholder value due to the increased number of shares outstanding.

Despite the current financial challenges, French retail group Casino, the previous controlling shareholder of GPA, has indicated its intention to retain a non-controlling stake in the company following the offering’s completion.

This share offering signifies GPA’s commitment to tackling its debt burden.

While the company faces operational hurdles, the capital injection provides a path towards potentially achieving a more stable financial future.

The success of this strategy will hinge on GPA’s ability to address its underlying operational challenges alongside the debt reduction efforts.