AFP, published on Sunday, November 13, 2022 at 11:54 am
Rising costs, stock market prices at half mast and massive debt to repay: the difficulties are accumulating for the group of private nursing homes Orpea, whose new management presents its transformation plan on Tuesday in order to turn the page on the scandal.
Where is Orpea?
The group’s turnover increased by 9.3% to reach nearly 3.5 billion euros over the first nine months of the year. However, its financial performance risks being affected by increases in energy costs due to inflation, and by increased personnel costs due to a recruitment plan.
Above all, Orpea is bent under the weight of a debt of 9.5 billion euros. “This is far too high a level compared to recurring operating income and available cash”, which reached 854 million euros at the end of September, comments to AFP Yi Zhong, analyst at AFP. Alpha Value.
In this context, investors expect Tuesday “solutions to ensure the proper operation of the group and generate cash on a recurring and sustainable basis”, she adds.
What about the stock market?
The Orpea share has lost 90% of its value since the beginning of the year and the revelations of the book-investigation Les Fossoyeurs.
One of the main shareholders, the investment fund Mirova, which held 4% of the capital, sold its stake. Two French groups, Mat Immo Beaune and Nextstone, have taken a stake in the capital, up to more than 5%, to “support” the management in the recovery of the group.
For analysts interviewed by AFP, a buyout of a large share of the capital of Orpea seems unlikely, in particular because of its heavy debt.
In addition, it is an “extremely political” file, underlines Pierre Michaud, portfolio manager at Monocle, to AFP.
“Orpea provides a public service, the State would not tolerate an outside actor or an activist fund taking control, it would counter it by raising the capital of the Caisse des dépôts”, he believes.
Similarly, the state would intervene if the sustainability of the group was threatened by the weight of its debt, according to the analyst.
How to reduce the debt burden?
Orpea has initiated an amicable conciliation procedure before the Nanterre commercial court in order to renegotiate its debt with its creditors. A first meeting is to be held on Tuesday.
It is a “suitable framework” to “effectively deal with the difficulties of indebted companies”, estimates with AFP Michael Cahn, associate lawyer at DWF in France. This procedure leads to an agreement in the vast majority of cases, according to him. However, “when it is used twice in the same year”, as is the case with Orpea, “the statistics are no longer as favorable”, he warns.
During these confidential negotiations, “everything is possible”, provided that you obtain the agreement of the creditors, specifies Mr. Cahn.
Orpea’s management wants to convert part of the group’s debt into capital and raise fresh money again, in debt and in capital.
“If they do not subscribe to the capital increase, the shareholders already present will be diluted, they will lose influence, voting rights”, observes AFP Numa Rengot, associate lawyer at the firm Franklin.
This type of operation can result in a “major” reorganization of the distribution of capital between the various shareholders, he adds.
What options in case of failure?
In the event of failure of an amicable procedure, the company in difficulty can open a safeguard procedure, if it is not in cessation of payment. Otherwise, it can go into receivership.
These procedures make it possible to freeze debts and prepare a plan to continue the activity while cleaning up finances.
The plan proposed by the company must be validated by the courts. However, if the court considers that it is not viable, it can order the liquidation of the company, synonymous with cessation of activity and layoffs.
Is Orpea protected from such an eventuality because it provides a service of general interest?
“In these procedures, there is always a social issue. Is it higher than the economic issue? Some files show that this is no longer the case”, observes Mr. Rengot. He mentions in particular the liquidation of the Camaïeu brand which led to the dismissal of 2,100 employees and that of Geoxia, builder of the Phénix houses, leaving its customers waiting for delivery without a roof.