Winding Up — When it rains it pours

Chris Haffenden
+Bianca Boorer
+ 5 more

28 March 2024•6 min read

The working week may be one day poorer but there’s been plenty to keep 9fin’s European distressed team busy.

Unsurprisingly, French situations have generated a healthy amount of coverage over the last four days. AlticeFrance’s Machiavellian ultimatum with lenders and its impressive value leakage capacity has strained our best credit and legal minds. And Atos announced it had entered into a conciliation process with its creditors after months of speculation and anticipation on the part of investors and 9fin’s editorial team.

On the topic of leakage, Thames Water has edged closer to the brink of special administration after shareholders ruled out a £500m equity injection following feedback from UK water regulator Ofwat. Thames Water’s shareholders have put together a £3.25bn rescue plan for the beleaguered utility supplier but it hinges on Ofwat’s approval of a 40% price hike to customer bills for the next regulatory period (2025-2030).

We’ve also kept the ball rolling with coverage of Ardagh, Demire and Intrum.

This week’s news

Altice France — After last week’s ultimatum which saw bonds prices plummet, 9fin looked at just how much value could be stripped from creditors. In our legal analysis we learned there is substantial room to designate more assets as unrestricted subsidiaries. Based on our own back-of-the-envelope calculations the builder basket has built up well over €10bn in capacity. We also reported on advisor appointments, the CDS conundrum, and the potential impact to Euro CLO health.

Ardagh — A crossholder group of the Irish packaging producer’s unsecured notes and ARD Finance PIK notes has started to amass a considerable number of creditors, according to 9fin sources. The group, which is advised by Milbank, is up to more than 40% of the unsecureds and one third of the PIKs at the Ardagh Finance entity and could be large enforce to force the company to deal with its capital structure in a much more holistic manner rather than focusing on the immediate problem of the roughly €3.2bn of debt maturing in 2025 and 2026.

Atos — The French cybersecurity and software firm released its FY 23 results on 26 March 2023, after postponing them twice already. As 9fin wrote, the annual numbers offered no surprises as the financial performance in terms of revenue growth, operating margin and free cash flow burn was in line with guidance. Importantly, Atos announced that it has filed for Conciliation, which is a court supervised process under the French pre-insolvency code, with the view of reaching a refinancing plan by July 2024 with its unsecured creditors including bank lenders and bondholders. Upcoming negotiations with creditors will be supported by a new business plan, which Atos said will be disclosed during the week starting 8 April 2024.

Boparan — The poultry provider said it appointed advisors to address the refinancing of its cap stack before the end of the year, but management did not disclose who it had appointed.

Constellation — The used car buyer and seller finds its way back on 9fin’s watchlist after a spate of soft results for Q3 2024 (ending December 2023) highlighted its volatility. Overall revenues were down 26% YoY for Q3 24 (ending December 23), while EBITDA was up just £3m YoY to £22m, according to figures provided by lenders.

Demire — The German real estate group announced it was in negotiations with an ad hoc group of creditors representing more than half its €500m unsecured notes maturing on 15 October 2024. Demire has tabled an A&E proposal to extend its notes up until 2027 with some improvements to their security package and margin. It is also contemplating a bond buyback for a €100m position, which it would then cancel.

Essity — An ad hoc group of bondholders presenting €270m across the Swedish hygiene group’s bonds released a statement calling for a general meeting of noteholders to call for the company to repay their notes. The AHG considers a sale of the group’s Hong Kong-listed subsidiary Vinda creates an event of default under the cessation of business terms in the group’s European medium term notes (EMTN) programme. Essity claims to have obtained “several legal opinions” to counter but has also arranged a €4bn unsecured revolver with BNP Paribas, which is roughly €200m larger than the group’s entire EMTN programme.

Intrum Justitia — The Swedish debt purchaser hosted an investor call on Monday in an attempt to calm investors. But, after rehashing management’s view on the credit’s value proposition, very few specifics in regards to how the potential restructuring (or else) may look were provided. Equity was ruled out but management did say they are taking a holistic approach to the cap stack, stoking the short-end versus long-end fire. In addition we investigated just How is Intrum’s big Italian deal doing? and reported on the CDS trades put on by hedge funds in the short-dated bonds.

Thames Water — The beleaguered UK water company announced today (28 March 2024) that its shareholders have decided to pull out of a plan to inject £750m equity, of which the first £500m installment was initially due by the end of this month. Shareholders were worried that the draft business plan that underpins the turnaround of the company was “uninvestible”. There is £190m term loan due in April 2024 sitting at Kemble Finance level but lack of liquidity there. This raises the prospect of a potential default at Kemble Finance that may trigger a cross default on the May 2026 bonds at Thames Water (Kemble) Finance plc (see more details in our analysis here). Unless lenders grant a loan maturity extension, this creates the possibility that the company could be plunged into a special administration process, admitted CEO Chris Weston this morning on the BBC Today. He also hinted that customers might be looking at up to 40% bill increases during 2025-30 to help Thames Water invest in its infrastructure.