Orpea - comments

Over the weekend there was press speculation surrounding the make-up of the equity post unsecured equitisation and subsequent rights issue. CDC (Caisse des Dépôts) reportedly wants to have control of the Company with a majority of the board, with some speculation that they want to have 50% of the post-re-org equity. We think this goes hand and hand with the recent increase in writedowns communicated by the Company in December. Obviously, this would require more dilution than our model envisages for the unsecured creditors, but we are not yet changing our model.

We see this press speculation as delayed and still expect the proposal to proceed. We would point out there are always alternative ways to give CDC and others control while giving unsecured creditors the economics they seek. But, the reality is those who put up the new money will ultimately call the shots.