Report: SoLocal financial restructuring plan fair for shareholders

By Caroline Salls

Pittsburgh, Oct. 5 – SoLocal Group announced the details of a report from an independent expert charged with providing a fairness opinion of the financial terms proposed to group creditors in connection with its restructuring plan.

According to a news release, the report concluded that the terms of the transaction are fair for shareholders from the financial point of view.

Specifically, the report done by Finexsi concluded that the shareholders of SoLocal, like its creditors, are faced with the group’s need to undergo financial restructuring in order to reduce its debt burden and allow it to continue its strategic shift, but primarily to ensure that the company remains leveraged at a level that the group can bear while still allowing it to invest and implement the strategic plan.

Under no circumstances could the company repay its bullet loans due in 2018, according to the report.

Finexsi said the amount of a proposed capital increase with preferential subscription rights is very large, as it represents around four times the current market capitalization. By subscribing new shares at €1 each, the report said shareholders would sharply reduce their average purchase cost per share.

On the other hand, Finexsi said shareholders would increase their exposure to the risks of a company that needs to make a success of its transformation. The report said they could negotiate their preferential subscription rights, but “effective negotiability is difficult to apprehend within such a significant volume of capital increase.”

If they decided not to subscribe any shares, the report said shareholders would be heavily diluted, but the bonus shares granted to them would limit that dilution. The shareholders’ stake in the company would in that case be only 11.9%, or 11.1% if creditors exercised their warrants, “a level close to comparable restructurings.”

If the market were to assign any value to the preferential subscription rights, the report said that would improve the position of shareholders accordingly.

Finexsi said its assessment work, based partly on the assumption that management will implement its business plan, produces a theoretical value per share of €1.70 to €1.87 for SoLocal after restructuring.

The report said the transactions reserved for creditors, including the issue of warrants, involve higher per-share values, which shows that they are fair for shareholders.

Thus, Finexsi said the average subscription price for creditors, including their potential subscription were they to guarantee the capital increase with maintenance of preferential subscription rights, is still higher than the €1 subscription price for shareholders, as it stands between €1.32 and €4.73.

SoLocal is a Boulogne-Billancourt, France-based online communications company.

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