Orpea makes second drawdown under conciliation financing agreement

Chicago, July 5 – Orpea announced that it made a second €650 million drawdown on its €1.733 billion conciliation protocol agreement with its core banking pool in a notice on Monday.

The core banking pool comprises BNP Paribas, Credit Agricole, Credit Mutuel Alliance Federale, Groupe BPCE, La Banque Postale and Societe Generale.

The second drawdown with an earlier €250 million draw in mid-June have the A1 and A3 loans from the agreement are now completely drawn.

Provision of credit

The conciliation protocol agreement signed in principle on May 12 with the borrower’s core banking pool received approval from the Nanterre Commercial Court on June 10. Documentation for the conciliation agreement was released on June 3.

Several tranches of loans are available in the form of a syndicated loan with borrowings available incrementally through the end of 2022.

The company has access to a class A1 loan, an A2 and/or A3 loan and an A4 loan.

For the A1 loan, the company was able to borrow up to €700 million in up to two drawdowns. The A1 loan matures on Dec. 31, 2023. The interest rate margin starts at 400 basis points and steps up 200 bps on Jan. 1, 2024.

On the A2/A3 loan, there is €600 million of availability. Amortization payments of €100 million each are payable semiannually starting in June 2024 with a final maturity date of Dec. 31, 2025. The A2 loan is available to be drawn in September, and the A3 loan was available from the June signing to Dec. 31, 2022. The annual margin is 400 bps (with no step-ups).

The company will also have access to a €200 million A4 loan with a bullet repayment at maturity on June 30, 2023. The company may access the funds through the end of the current year. The interest rate margin starts at 350 bps with a 100 bps step-up on July 1, 2023.

The agreement also includes a class B loan and a C1/C2 loan tranche.

A €229,389,198.48 class B loan is also available through the end of the year. The interest rate margin is 400 bps, and the loan matures on Dec. 31, 2025. Drawdowns will be based on the existing debt to be refinanced, referring to payments due on unsecured financings of the group, excluding any bond financings, in the second half of 2022.

Additionally, the group may have access to up to €1.5 billion as a C1/C2 loan to refinance any of the group’s existing unsecured financing, absent bonds. There is no amortization on any draws of the loan, with the loan maturing in Dec. 31, 2026. Availability is through Dec. 31, 2022. The interest rate margin is 500 bps.

The benchmark is Euribor.

Proceeds are being used to finance the group’s business, repay existing finance arrangements on time and fund the necessary investments for the group’s business.

Background

Orpea has been undergoing an investigation into elderly abuse and rationing of care since the start of the year.

The company has taken corrective measures, including the July 1 appointment of a new chief executive officer.

The group faces exceptional expenses related to the management of the crisis and its consequences.

The company faced significant financing challenges due to investments amounting to approximately €900 million per year for the development of its real estate portfolio in 2022 and 2023 as well as a significant amount of debt maturing in 2023.

The company no longer had access to the financial markets and there was a slowdown in the originally anticipated asset disposal program.

The agreement with the banking pool represented a first stage of the overhaul of the group’s financing strategy, enabling new lines of financing to be secured.

The financing plan included a commitment to the lenders to maintain a minimum cash level of €300 million, to be tested quarterly from June 2023.

As part of the financing plan, the group intends to complete more than €3 billion worth of disposals by the end of 2025, with at least €1 billion of disposals by the end of 2023, primarily in real estate in the form of sale and leasebacks.

Part of the proceeds from the disposals will be immediately allocated to the repayment of the short-term

Orpea is a Paris-based long-term care facility operator.

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