Orpea SA’s shares are trading 10 times above where the embattled care-home operator says they should be given the massive financial restructuring that’s looming for the company.
(Bloomberg) — Orpea SA’s shares are trading 10 times above where the embattled care-home operator says they should be given the massive financial restructuring that’s looming for the company.
The stock dropped as much as 15% Monday after Orpea said it entered an accelerated court-supervised procedure to carry out the revamp, which will result in debtholders owning most of the shares. The deal includes converting €3.8 billion of unsecured debt into equity and raising another €1.36 billion of capital through a group of investors led by public lender Caisse des Dépôts.
“These capital increases would take place at issue prices significantly lower than the current stock market price of the Orpea share,” the French company warned Friday.
The stock dropped 11% to €2.06 at 11:43 a.m. in Paris. In February, the company said the theoretical value of the shares after the restructuring would be below 20 cents but the stock price has averaged €2.54 since then.
The stock price has held up in part because a group of Orpea’s unsecured creditors is teaming up with some shareholders on an alternative restructuring proposal for the nursing-home operator, which has collapsed in value since a scandal last year over how well it cares for the elderly in its homes.
“One of the main reasons to explain the current share price is that existing shareholders refuse to recognize the CDC-driven transformation/recap plan and are trying hard to overturn it,” said AlphaValue analyst Yi Zhong.
Under the procedure announced Friday, known as a safeguard process, a court can force dissenting creditors to accept the terms even if the company doesn’t have majority support from its lenders.
Orpea investors such as the billionaire Peugeot family’s investment arm suffered heavy losses with with the collapse of the scandal-ridden group sending shares down 97% since January 2022.
Zhong added that she stood by her advice to investors she gave in a Feb. 16 note about the stock. “The only strategy now is to take what is left of your money and run,” she wrote at the time, giving the stock a target price of €0.19.
An Orpea spokeswoman declined to comment on the stock price.
–With assistance from Irene García Pérez.
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