Winding Up — Sacréblue! more Altice France unrestricted subs

9fin team

17 May 2024•5 min read

9fin did some live reporting from Paris this week as our reporter Bianca Boorer met with restructuring practitioners both in the rain and sunshine! It proved perfect timing given Altice France came out with its first highly anticipated move, a development for which its hundreds of creditors have been on tenterhooks.

The beleaguered French Telco sent out three notices to lenders saying it has moved five more subsidiaries to the unrestricted group as well as agreed with lenders to move its RCF from HoldCo to OpCo level. Quelle surprise! Well not really, as creditors were anticipating more subsidiaries to be moved given it has over €10bn capacity to do so. After the eventful earnings call in March, the group’s founder Patrick Drahi revealed he planned to use the proceeds from the sale of assets in the restricted group to undertake discounted transactions. This spooked investors into corralling into France’s first ever co-op agreement scenario, to defend themselves against his next move. Watch this space as there is definitely more to come with questions remaining over what assets these newly unrestricted designated subs hold.

Regarding co-ops, 9fin published a primer (”A temporary truce or a permanent peace? The cooperation agreement explained) on their use in recent weeks in the context of distressed European businesses: namely, Altice and reportedly Ardagh too. They have been used a couple of times in Europe before, but this is their first material foray into the Europe market. In broad terms, the aim is to get a creditor group to form a united front against an aggressive sponsor/borrower, with a view to preventing side deals being consummated with some creditors but not others. There are a few problems to look out for with these though. The first, overarching point is that the success of a cooperation agreement will turn on continued creditor unity. The borrower may seek to splinter a unified group by offering up side-deals to some creditors but not others. The second area of concern is a collection of more technical potential pitfalls. Cooperation agreements are much more effective at prohibiting action taken within the existing contractual framework than outside it (eg uptiers rather than drop downs). There are also potential enforceability issues in European jurisdictions.

Elsewhere in the land of stressed companies, our LevFin reporters were able to source some private earnings for Spain-based customer experience (CX) firm KronosNet and German medical company GHD GesundHeits.

This week’s news

Altice France — The French Telco has revealed its first highly anticipated move, disclosing designations of five more subsidiaries as unrestricted as well as moving its HoldCo RCF down to OpCo level, according to filings on a lender data room seen by 9fin sources over the last two days. The filings mention seven subsidiaries that have been moved since March, including Altice Media and UltraEdge, which were previously announced. The third filing also said that the RCF was amended by moving it from the HoldCo level to OpCo. 9fin’s value and scenario analysis is here.

GHD GesundHeits — The German medical company shipped weak FY 23 results, increasing pressure on sponsor Nordic Capital to provide support amid its recent Moody’s downgrade. Headquartered in Germany, GHD GesundHeits is a provider of home care medical services and distributor of medical devices. According to 9fin sources, GHD GesundHeits reported FY 23 adjusted EBITDA of €47m (giving 7x leverage), adjusted up from €32m (10x leverage). It has approximately €30m of cash left.

Foundever and KronosNet — Artificial intelligence is threatening the business models of client management outsourcing companies, and sending the debt of credits like Foundever and KronosNet sliding. These types of companies — often called business process outsourcing or customer experience firms — are facing two AI-related challenges: their contracts, sometimes based on employing humans, could be displaced, and they are under pressure to increase capex to develop their own AI technology.

Labeyrie — The French fine food company has fattened up its cash position, but lenders are asking for seconds when it comes to deleveraging and divesting, following a year of challenges. In February YTD 2024, PAI Partners-backed Labeyrie posted €94.6m in its closing cash position, a boost of 35.7% over last year, and up over €80m from December YTD 2023, driven in part by the sale of its trout joint venture Aqualande. For the same period, EBITDA (excluding Aqualande and IFRS 16) was at €39.5m, up 19.1% compared to last year, though 14.3% below budget. This boost to EBITDA has improved net leverage — down to 6.6x from 7.8x last year and 7.5x in December.

Medical Properties Trust — The real estate investment trust has delayed filing its 10-Q filing to no later than 15 May, as its auditor PwC needed more time to complete its interim review of certain impairment charges related to Steward Health. 9fin previously reported PwC had not qualified MPW’s 10-K and the SEC was sending the company letters demanding it get Steward to provide the REIT with audited financials. MPT also noted in a filing today that it added a roughly $220 impairment of the International JV loan, which is collateralized by Steward equity.

Lateral Moves

On Monday (May 13), Interpath Advisory announced that it hired Matthew Jubb as Managing Director to join the firm’s transformation and turnaround offering.