Orpea - comment

Last night’s Orpea's statement is a rude reminder of the issues facing the business. Orpea outlined further asset write-downs of between €5-5.4bn versus previous €2.1-€2.5bn expectation announced in late October. This leaves the real estate value at c. €6bn, with a senior debt outstanding of €5.2bn as of December year-end. But with a further €600m of deb expected next year, this leaves Gross LTV to be in excess of 95%.

The statement was released prior to the Conciliation meeting which is due to take place today. Orpea are continuing with their plan to raise an additional €600m of new debt which is required in February 2023. In parallel, the Company are continuing to raise additional equity with an (optimistic) expectation of binding offers in January 2023.

However, this new money doesn’t deleverage the business as it will be used to fund the €1bn of senior debt which matures in FY23, with a further €430m in FY24. Coupled with the cash outflow from operations totalling €320m (In FY23 -c.€400m and in FY24 €79m). It is imperative on the Company to raise the equity, which may require further dilution to converted bondholders.