Orpea - comment

As we approach the new “transformation plan” by Orpea’s new management on 15th November, we expect numerous press articles from all parties manoeuvring their viewpoint into the public domain. Today in the press is the turn of the two recent shareholders, whose central view is that sufficient time has not been given to the strategy of asset sales to deleverage Orpea SA. One of the shareholders is a former owner of a nursing home who sold its operations to Orpea. Examining the first Conciliation Process which concluded in May, they share the then-held view of the Company that 18-24 month timeframe for asset sales would be sufficient to deleverage. However, with operational performance deteriorating and a weakening property investment environment, waivers will be required for covenants breaches at year-end. We remain cautious about the underlying performance of the business and with a weakening property market, we see no alternative to a significant equitization of Orpea’s unsecured debt.