Belvedere says working on solving covenant breach

PARIS, June 23 (Reuters) - French spirits and wine company Belvedere SA (BEVD.PA) said on Monday it was working on solutions to correct a potential breach of covenant in its senior secured debt, which pushed its shares down nearly 30 percent on Friday.

Standard & Poor's cut its rating on Belvedere by one notch to B-, six notches below investment-grade status, and warned it could cut the ratings again by several notches, after Belvedere disclosed in its annual report, published on Wednesday, that purchases of its own shares in 2007 were not in compliance with clauses in its floating-rate notes restricting such payments.

"One of the auditors has expressed reserves relating to a potential covenant breach in the group's senior secured debt," S&P said in a statement.

Belvedere said in its annual report it had 60 days to fix the breach or face the possibility bondholders could declare a default.

In a statement published late on Monday, Belvedere said: "The company and its management are working on various solutions to correct this situation under the Floating Rate Notes Indenture as promptly as possible."

It did not say what these solutions were.

Belvedere said it was forced to buy blocks of shares twice following the acquisition of Florida Distillers and the completion of the PIPE transaction of July 2007, which ended the dispute between the company and its majority shareholder.

The French company reaffirmed it was "actively" working on sales of non-strategic assets and the refinancing of its debt.

"The proposed solutions to correct the situation arising out of the excessive number of shares held in the treasury are part of the discussions relating to our Group's future," it added.