the State and the creditors clash over the future of the group

Will the Orpea group manage to get its head above water? For the moment, nothing is less certain. A year after the publication of the book Les Fossoyeurs (1), the world leader in nursing homes is now in debt to the tune of 9.5 billion euros and it does not seem to be on the road to recovery.

In talks for several weeks to ensure a future for the company, the Caisse des dépôts et consignations (CDC), the financial arm of the State, and the group’s creditors oppose each other. Negotiations ended overnight from Wednesday to Thursday, without them managing to sign an agreement, said a statement from the Orpea group.

In November, Laurent Guillot, new CEO, unveiled a reconstruction plan to clean up Orpea’s financial situation. The group was already exposed to a risk of lack of cash to pay its 72,000 employees, including 12,500 in France. The new managing director hoped to raise new financing and convert 3.8 billion of his debt into equity.

Discord between the ethical interests of the state and the financial interests of creditors

The State, via the CDC, quickly took part in the negotiations on the recapitalization of the group. Under the terms of these exchanges, the Fund offered to provide 1.3 billion euros in fresh money (double its initial proposal which amounted to 700 million), i.e. 80% of the total sum hoped for by the executive management.

But the CDC did not stop there. After the accusations of abuse against Orpea, the public institution deemed it necessary to take a little more than half of the capital, to have a majority on the board of directors and the management of the group. “If we enter the capital, we want control,” said Eric Lombard, director general of the Caisse des dépôts, in Le Journal du dimanche on January 15. He said he wanted a “profound change of model”.

Ethical requirements therefore, but incompatible with the financial interests of the main creditors concerned, the “guns” (“Group of Unsecured”), among which we find managers and funds such as Anchorage, Carmignac, Boussard & Gavaudan… They hold approximately 1 .9 billion of the debt out of the 3.8 billion intended to be converted into capital.

A solution to be found before mid-February

The differences between the CDC and the financiers concerned the distribution of capital and the value of the group. The Caisse has valued the group at around one billion euros (a figure twice as high as its initial proposal and the current value on the stock market). But this estimate remains several hundred million euros below that of the creditors (around 1.4 billion). They fear losing out when converting debt into capital and therefore harming the interests of their savers, they explain.

After this failure in the negotiations, Orpea indicated that it was continuing “discussions with the group of unsecured financiers whose support is necessary to reach an agreement on a restructuring plan”. The group must now find 1.3 billion euros and quickly: it has until mid-February to find a solution within the framework of an amicable conciliation procedure.

According to the daily Le Monde, two shareholders, Philippe Péculier and David Azoute, representing between them 5% of the group’s capital, are proposing an alternative solution: the sale of 5,000 beds (out of a total of 87,000) to make one billion euros of asset disposal. But this proposal would have been rejected by the general management.

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