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Casino Guichard-Perrachon SA’s recovery from a July low is proving short-lived after a review of the French retailer’s joint-venture transactions by Sanford C. Bernstein rekindled fears about its debt situation. The company refuted the conclusions drawn in the analyst report.

The stock slid as much as 11 percent on Wednesday to levels not seen since 1996 after analyst Bruno Monteyne lowered his rating to underperform and slashed the price target to 26 euros from 35 euros, the lowest among brokerages tracked by Bloomberg. Shares in parent Rallye SA also fell, trading down 5.9 percent as of 4:21 p.m. local time, while Casino was down 8.8 percent, slightly paring earlier declines after the company’s statement.

Investors should deduct 152 million euros ($176 million) from their calculations of earnings before interest, tax, depreciation and amortization to reflect the impact of related-party transactions, mostly French franchisees, on Casino’s valuation, Monteyne wrote in a note.

“Our review of some of Casino’s JV transactions leads us to conclude that the impact of those related parties is more material than we previously perceived,” the analyst said. “This lower valuation leaves us concerned about leverage triggers at other levels of the Casino holding structure.”

No Obligation

Casino has no obligation to buy back the stores transferred to franchisees, the Saint-Etienne-based company said in a statement in response to the Bernstein report. “In a very unlikely scenario” where all the stores transferred would have to be simultaneously closed, the one-off cost for the group would be limited to about 50 million euros, it said.

Chief Executive Officer Jean-Charles Naouri stemmed a sell-off in June with a plan to divest 1.5 billion euros of assets such as stores to reduce debt. While the strategy was well received by investors, Casino shares took a further hit on July 26, the day it announced first-half results, on concern its headline debt-reduction figure was mostly achieved through a cash transfer from another entity within the group.

Rallye and Casino bonds also declined on Wednesday. Rallye’s 350 million euros of notes due January 2023 fell 4.8 cents on the euro to 68.5 cents, the lowest on record, according to data compiled by Bloomberg. Casino’s 514 million euros of bonds due August 2026 slid 2.5 cents to 92.3 cents, the lowest in more than two years, the data show.

The cost of insuring Rallye’s debt against losses jumped to a record, while Casino’s surged to the highest since January 2016. Credit-default swaps protecting Rallye’s debt for five years soared to the equivalent of 1,925 basis points and Casino’s rose to 481, according to data from CMA. An increase signals deterioration in perceptions of credit quality.

Rallye is under pressure to meet upcoming debt maturities as Casino’s share plunge pushes the value of the parent company’s assets below its debt. Rallye has 300 million euros of bonds due in October and may have to also repay 375 million euros of exchangeable debt the same month.

Rallye “says it has enough liquidity to do so, but this surely will add to the pressure on the overall structure,” said Bloomberg Intelligence analyst Charles Allen.

Most of Rallye’s credit lines require it to pledge Casino shares as collateral and the further the shares fall, the more difficult that becomes. The company will cover debt maturities until at least the end of 2019 using credit lines and issuing new bonds, Rallye’s Chief Executive Officer Franck Hattab said in June, when Casino’s shares were at 33.3 euros, above Wednesday’s level of less than 32 euros.

Short bets on the owner of the Franprix and Monoprix banners, which is jostling for dominance of the competitive French retail market with rival Carrefour SA, have increased in the past two weeks. Short interest is about 12 percent of shares outstanding, according to data supplied by Markit. With Rallye owning almost 51 percent of Casino, the short interest is nearly 25 percent of the effective free-float, according to BI’s Allen.

(Updates with Casino response from first paragraph.)