Posted on Jul 3, 2020 at 6:53 p.m.Updated on Jul 3, 2020 at 7:04 p.m.
SoLocal is not done with epic general meetings. The one to be held on July 24 should not be easy. The shareholders of the former publisher of directories, converted to digital marketing, will have to choose between plague and cholera.
Either they validate the refinancing agreement found with the group’s creditors this Friday and which dilutes them very widely. Certainly, they would keep the possibility of reinvesting in society, at the preferential rate of 3 cents per share – light years away from the price of 1 euro from a year and a half ago, or even that of 16 cents displayed during of the course suspension on June 12. But without returning to the pot, they would keep less than 10% of the capital.
Or they refuse such dilution – all the more difficult to accept since this is the third financial restructuring in six years. But the company will not be able to avoid filing for bankruptcy … and the same creditors will still take control. They benefit from a pledge on the securities of SoLocal, which allows them to recover more than 98% of the capital provided they bring 120 million euros in cash.
The idea of investing in the three – color Montefiore background, which has been studied at length, was not retained. “ Creditors are at the center of the game. They haven’t opened the door to other solutions “Explains Pierre Danon, Chairman of the Board of Directors, who has led negotiations since the start of this crisis – correlated to that of the Covid-19. ” I am sorry. I am a shareholder myself and I am also crushed. The only positive side is the possibility of reinvesting, up to 45 cents per share ».
For shareholders, the potion will be bitter. However for the company, it will be a relief. In Bercy, where the matter is being closely followed, we say to ourselves “ very satisfied that a solution is emerging to secure the future of SoLocal ” A significant reduction in the group’s debt could open access to an EMP, which management has been demanding in recent days. “ I found the criticisms of Bercy void, coward Pierre Danon. It is not their fault that we are in the blind spot of the ELP, arriving with a lot of debt and no French bank ».
The biggest LBO in history
Above all, PGE or not, it would be the end of a long ordeal: SoLocal has dragged the ball of its huge debt since 2006, when KKR and Goldman Sachs had achieved the biggest LBO in French history by buying half the capital for 3.3 billion euros. The agreement reached with the creditors will make it possible to divide the debt almost by two to fall to 250 million euros. SoLocal will only have 20 million euros of interest to pay per year, against 45 so far. This will be more sustainable, provided that growth is restored.
Before the Covid, it was off to a good start. SoLocal had completed a difficult transition from selling paper directory advertising to online marketing. The shift, operated in particular since 2018 by a former Microsoft, Eric Boustouller, had operated in pain – with 1,500 departures of employees – but began to bear fruit with a return to the green in 2019.
The shock of the Covid stopped this mechanism. But management hopes to regain momentum. “ There is an attraction for digital that we can capture with our excellent sales force “Assures Pierre Danon, who is banking on 8% growth per year to generate 175 million euros in Ebitda in 2023, the same level as in 2019.
A New York fund
There remains the question of the takeover of a strategic asset by a foreign financier, raised in particular by Arnaud Montebourg who seized Bercy. The New York fund Golden Tree would find itself, at the end of the operation, with 15% of the capital and two seats out of eight on the board of directors.
Not enough to justify the cries of gold, says Pierre Danon: Golden Tree is a fund specializing in former directory publishers. He worked on this type of business in the United Kingdom, Italy, Canada … and always stayed four or five years. It’s too easy to describe them as big bad guys. Fortunately, these American funds were there in recent years. Few French banks have offered us their support. I add that they annexed to the agreement their support for the management strategy and the absence of PES ».
Failing to console the shareholders, this latest news will reassure the 3,000 employees of SoLocal.