Atalian - comment

The delay in completing the sale of the business to CD&R concerns us and indicates that CD&R is blanching at the price. The situation is binary: 1) The Julian family successfully negotiates to get the deal back on track, and the bonds return to par or 2) the deal fails and Atalian needs to find €300m somewhere else, getting this cash elsewhere will not be easy and with weak cash conversion and interest coverage, Atalian could need to restructure its debt. In that context, the bonds would likely head to the low 50’s. We blame margin pressure in France as rising staff costs are not being passed on to clients which is considerably more worrying than the travails in the US business, where new management is struggling to rebuild post-Covid. The extension to 16 December is mercifully short, so we should hear soon.

In the acquisition deal (announced on 8th August) we calculate that CD&R was targeting pre-synergy leverage of 7.8x on an 11.0x multiple. The economic and financing conditions have not improved since then.