Orpea - comment

Orpea’s held their Q2 conference call last night after the release of H1 numbers. We await full publication of their accounts, but our initial thoughts is that the banking group have continued to show support to Orpea with €2.25bn of the financing package drawn down as of last night. This includes c.€800m of previously uncommitted C Tranche. There remains a further c.€700m that can be used to refinance bilateral unsecured creditors, if required. Note, it can not be used to refinance unsecured bonds or Schuldschein.

The management were light on details surrounding plans for further divestments of real estate assets, instead referring to a proposed future presentation outlining the near-term plans.

Operationally, as expected, all regions are experiencing top-line growth as the business rebounds from the Covid crisis. Increases in staff costs are contained but other costs, including catering (food) and energy have increased substantially, in line with market inflation. Energy costs, as a % of revenue, increased from 1.9% of revenue in H1 ’21 to 2.9% in H1 ’22.

Management also outlined there is the distinct possibility covenants may be broken at December year-end. The new banking facilities do not have any covenants, however, c.€4.1bn of debt has gearing and leverage ratios.