In turmoil since the publication in January of the book-investigation The Gravediggersthe Ehpad giant is doing very badly.
Orpea is “exposed to a risk of lack of liquidity during the first quarter of 2023“, warns this Tuesday the group of private nursing homes. Arrived at the controls of Orpea in July, Laurent Guillot, the former number two of Saint-Gobain, passes a great oral under tension. He presents to investors his plan to transform Europe’s number one nursing home, which has been in turmoil since the publication in January of a book revealing questionable practices. The boss and his team have three hours to convince. “We expect more from Orpea than the tightening of bolts, loose a shareholder, but new governance practices and the establishment of a “Tripadvisor” for nursing homes which will make it possible to make it a reference in the sector.»
The challenge is big. The company, once cited as an example by investors, is doing very badly. Its stock price has lost 90% since January. If its turnover increased (+9.3% to 3.5 billion euros over the first nine months of 2022), the company posted a net loss of 269 million euros in the first half. The occupancy rate of its retirement homes in France, up to 85.4%, remains 1.5 points lower than the average rate observed a year ago. Above all, Orpea is burdened with a debt of 9.5 billion euros, for 854 million euros of available cash.
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Cornered, the company had obtained new bank financing in May after a conciliation conducted under the aegis of the Commercial Court of Nanterre. To everyone’s surprise, it announced a second procedure at the end of October, this time to renegotiate its debt. Management deems the planned asset disposals impossible and forecasts more than 2 billion euros in asset write-downs.A solvency crisis then came on top of the initial crisis“Summarizes an investor.
Tuesday evening, during the first meeting with the creditors, Laurent Guillot will plead for the conversion into capital of half of the debt of Orpea. It also wants to raise up to 2 billion euros, in debt and capital, from current shareholders, bondholders and new investors. “If he manages to convince, the managing director can hope to obtain from his creditors more financial flexibilitycommented Yi Zhong, an analyst at AlphaValue.
“Agreement not possible?”
But this project arouses both the ire of many shareholders and some creditors. If they do not return to the pot, the former risk being strongly diluted; the latter are afraid of being “flushed out” because they cannot convert their debt into capital.
“Isn’t the management creating the conditions for an impossible agreement in order to go into safeguard proceedings and thus draw a line under the debt?, asks an investor. This would allow him to start again on a growth model for Orpea.»
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The Mirova fund, historical shareholder of Orpea (4%), left the ship as soon as the debt restructuring project was announced. Conversely, Mat Immo Beaune and the Nextstone fund, which together hold more than 5% of the capital, joined forces to prevent debt restructuring. They asked for the convening of an extraordinary general meeting. “The management of Orpea will probably darken the picture in an attempt to justify the hasty crushing of 4.3 billion euros of debt“says one of their relatives.
The Caisse des dépôts as a pledge of credibility?
Some creditors have come together to assert their rights. “We must not exclude that they go to litigation, because they are revolted“, Estimates a close friend of the file, predicting a”long battle”. Another group of lenders, coordinated by Carmignac and made up in particular of hedge funds, does not refrain from reinvesting in Orpea under certain conditions. “Together, we will negotiate with, as priorities, the sustainability of the company and the interest of our customers, we explain at Carmignac. This process should take several months.”
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The Caisse des dépôts (CDC) could take a stake in Orpea, giving it a guarantee of credibility. The State cannot afford to helplessly watch the liquidation of a group with 350 establishments in France. The arrival of the CDC could encourage the two historic shareholders of Orpea, the Caisse des dépôts du Québec and the Peugeot family holding company, to reinvest in the company to support its rebirth.
The CDC says it is ready to examine the file on two conditions: “Business practices must completely change, details a relative. The company’s balance sheet must be repaired in order to allow it to recover without the need to aim for excessive margins.”