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Swedish private equity group EQT has offered to inject €220mn to help secure a restructuring deal at one of its two struggling French portfolio companies.
EQT, which bought the nursing home group Colisée in a 2020 buyout, made the proposal on Monday as part of a package that would see holders of a €1.2bn secured loan write off around 36 per cent of their debt in exchange for a 33 per cent stake in the business, according to people familiar with the discussions.
While no deal has been agreed, EQT’s offer to inject money has been positively received by lenders, one of the people said. A smaller credit line from banks would not be impaired, another person said.
Heavily indebted French companies have come under pressure in recent years, due to a moribund economy coupled with the removal of post-Covid support for businesses and rising interest rates on their borrowings.
If EQT succeeds in recapitalising Colisée, it would mark the latest in a string of debt restructurings in France, with Patrick Drahi’s Altice telecoms group striking a landmark €24bn deal with creditors of its French business earlier this year.
It would also help fix the balance sheet at one of two EQT portfolio companies in France to have come under pressure in debt markets in recent months.
Colisée’s debt slumped in value this year after it disclosed accounting discrepancies and growing liquidity pressures. The debt of medical laboratory group Cerba, which EQT bought in 2021, is also trading at distressed levels following worsening performance.
Cerba’s secured bonds are trading at 77 cents on the euro, while its unsecured debt is trading at about a fifth of face value, suggesting lenders are braced for heavy losses. Cerba reported slowing earnings earlier this month that meant its leverage on a debt to adjusted ebitda basis had risen to 8.6 times.
Colisée operates 400 sites across France, Belgium and southern Europe, making it the fourth largest operator in Europe. Moody’s downgraded its credit rating to Caa2 last month, which the rating agency defines as indicating “high credit risk”, noting there had been a “significant deviation from our expectations for earnings recovery and continued adequate liquidity”.
Moody’s added that a “couple of accounting discrepancies” had also “resulted in lower earnings”.
Colisée’s rival Orpea reached a debt restructuring agreement two years ago, after struggling under a high burden and facing scrutiny from a journalist’s investigation alleging systematic mistreatment at its care homes.
French grocer Casino is also coming under renewed pressure in debt markets, less than a year after it completed a restructuring in which more than €5bn of debt was wiped out and exchanged for equity.
EQT and Colisée declined to comment.
