How Vallourec came under the control of its creditors

The rescue of the oil services group was the subject of a showdown between French banks and hedge funds.

It is the last of the French oil services companies to restructure its debt, after being washed out of the crises in the sector in 2015 and 2020. Vallourec reached an agreement on Wednesday with its creditors to erase 1.8 billion euros in debt, on a total of 3.5 billion. “ Few companies have the resources to withstand two major crises in less than five years, says Édouard Guinotte, chairman of the Vallourec board. We needed to update our balance sheet, which is the last stone of our restructuring plan, which began in 2015. »

This debt restructuring is reflected in the takeover of the group by its bond creditors, foremost among them the American fund Apollo, which will hold between 23% and 29% of the capital, followed by SVPGlobal (between 10% and 12%). These debt funds accepted the conversion of 1.3 billion euros of debt into capital. Apollo, one of the very first hedge funds in the world, benefits from recognized experience in the French industry, having participated over the past fifteen years in the recovery of Verallia, Monier, Constellium and Latécoère.

Debt funds are betting on Vallourec’s recovery, endorsing Édouard Guinotte’s strategic plan and guaranteeing a future capital increase of 300 million euros. The historical shareholders, BPI France and Nippon Steel, who will be greatly diluted by the debt conversion, will participate in the capital increase to the tune of 20 and 35 million.

Position of strength

Vallourec opened the discussions in a position of strength compared to its banks (BNP Paribas, Natixis and BFCM). The group had previously, last year, drawn its historic credit lines. The establishments could therefore no longer cancel them during the restructuring. This is where the generous cash flow of the group comes from, of 1.3 billion euros. The banks were all the more pushed into conciliation as a deadline of 1.8 billion euros was looming on February 8. Vallourec also obtained the means to continue its activity under good conditions, thanks to a loan guaranteed by the State of 262 million euros and export guarantees over five years. This last tool is essential to be able to participate in calls for tenders from its customers.

The banks, however, played a game of arm wrestling until the last moment with the funds. It happens that, in this kind of case, the banks, less protected by the law than the bond creditors, “ mow “: The Anglo-Saxons speak of” haircut ”(Haircut) referring to debt restructuring.

In the Vallourec file, the French establishments, BNP Paribas in the lead, wanted to show that it was not inevitable. They took advantage of their position as an essential partner of the group to waive fewer debts than bondholders. They certainly agreed to erase 169 million euros in debt (out of a total of 685 million), without obtaining capital. But they obtained a mechanism of return to better fortune (not yet quantifiable), a repayment of 262 million euros of their debts and a refinancing of 462 million, which is always better than a cancellation of outright debt.

The plan endorsed, the action of Vallourec, suspended since Tuesday morning, should resume its listing by Friday.

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