Orpea - comment

And we are a step closer. Caisse des Dépôts, plus CNP Assurances and MAIF and MACSF (Groupement), have reached an agreement in principle with 50% of the unsecured debt holders to a term sheet, along the lines proposed by the Company. This will take place over 3 stages.

Stage 1: All of the unsecured debt of Orpea (c.€3.8bn) to be equitised, with existing shareholders diluted to 1% and with unsecureds holding the remaining 99%.

Stage 2: There will be a capital raise of €1.16bn, only available to the Groupement. This will leave the shareholder split: 50.2% to Groupement, 49.4% to the Unsecured debt that was equitised and 0.4% to the existing diluted shareholders.

Stage 3: Subsequently, there is another equity raise, of c.€400m which will be underwritten proportionally by the Groupement and the Unsecured creditors.

Effectively, the Groupement new equity are providing €1.36bn of new money to take c.50% of the post restructuring Orpea. The Unsecured creditors have equitised their debt and provided c.€200m of new money, to take a 49.4% stake. This implies 30c recovery on the unsecured debt, if, and it is a big if, the Groupement equity is at fair value. We still see Orpea with significant leverage post restructuring, and the Company’s own projections published in November 2022, leverage will still be c.6.5x by FY25.