AGREEMENT IN PRINCIPLE ON FINANCIAL RESTRUCTURING PLAN
€420 MILLION NEW FINANCING AND DELEVERAGING THROUGH € 660 MILLION DEBT EQUITIZATION
Opening of an accelerated financial safeguard procedure
Paris (France), 22 June 2020 – Technicolor (Euronext Paris: TCH; OTCQX: TCLRY) (the “Company”) announces today that it has reached an agreement in principle on a financial restructuring plan (the “Agreement In Principle”), which meets the Company’s objectives of (i) obtaining a new financing in an amount of €420 million, addressing the liquidity needs of the Group and (ii) deleveraging the Company’s balance sheet, through the equitization of up to €660 million of its Term Loan B and Revolving Credit Facility. The Company has received the support of a majority (65,77%1 ) of its lenders under the Term Loan B and Revolving Credit Facility and of Bpifrance Participations, an institutional shareholder.
This Agreement in Principle, whose terms and conditions are described in more details below, provides a framework for long-term sustainability for the Company’s businesses, employees, customers and suppliers, and offers its current shareholders an opportunity to participate in the Company’s recovery. Based on the proposed new financing plan, gross debt2 is to decrease from the current position of €1,444 million to €1,102 million. The net debt to EBITDA target (post IFRS 16 adjustments) is around 3x at end of 2021, decreasing thereafter.
Furthermore, the Company announces the opening today of an accelerated financial safeguard procedure, in order to facilitate the implementation of the Agreement in Principle, by the Paris commercial Court.
In February 2020, Technicolor informed the market of its intention to launch a €300 million rights issue by June 30th 2020 at the latest, which was authorized by the general meeting of the Company’s shareholders on March 23rd 2020. Since then, the impact of the Covid-19 crisis on the business activities of the Group, and the uncertainty in global market conditions, have rendered it difficult to launch the initially contemplated rights issue within the contemplated timeline, and have increased the liquidity needs of the Group, which were originally intended to be covered by the rights issue.
In May, the Company launched a confidential process aiming at raising a new money facility replacing the rights issue in order to finance the group’s operations and to repay the $110 million bridge loan due on July 31st.
Technicolor has received offers both from third parties and from existing creditors, including notably, as announced in the June 4th press release, an offer from a group of creditors representing 59% at that time of the Term Loan B and the Revolving Credit Facility, in the framework of the conciliation proceedings opened on June 2nd. This proposal addresses both the Group’s liquidity requirements and the need to deleverage the Company’s balance sheet, through a combination of a rights issue (fully backstopped by the Term Loan B and Revolving Credit Facility lenders by way of set-off of their claims) and a capital increase reserved to the Term Loan B and Revolving Credit Facility lenders (subscribed by way of set-off of their claims).
Upon the recommendation of the Comité Ad Hoc (appointed by the board in the context of the debt restructuring and composed of a majority of independent directors) and given the potential significant dilution implied by such capital increases, the Board of Directors decided on June 5th to appoint, on a voluntary basis, Finexsi (g.windsor@finexsi.com / 01 43 18 42 42), as independent appraiser, in accordance with article 261-3 of the AMF General Regulation. Finexsi will, in particular, issue a fairness opinion on the proposed capital increases.
On June 11th, the Company announced the launching of a waiver consent solicitation of its existing lenders under its Credit Facilities, in order to allow the Company to have the option to request (i) the opening in France of a “procédure de sauvegarde financière accélérée” (which is a form of pre-negotiated safeguard procedure with financial creditors only) (“SFA”) on Technicolor SA and (ii) the recognition of the SFA in the US, in accordance with applicable regulations (the “Recognition Procedure”), without such actions constituting an event of default under the Credit Facilities.
After having received waiver consents from the requisite majority of its lenders, the Company therefore decided on June 18th to file a request for the opening in France of an SFA, with the Recognition Procedure to be filed shortly after the SFA has been opened. The SFA was effectively opened today.
The SFA allows for the implementation of the transaction with only a 2/3 majority of impacted lenders under the Credit Facilities. As of today, lenders representing 65,77% of the principal amount of the Term Loan B and Revolving Credit Facility, as well as Bpifrance Participations, an institutional shareholder holding c. 7.5% of the share capital (the “Ad Hoc Group”), support the Agreement in Principle, setting out the terms and conditions of the debt restructuring of the Group, as further detailed below.
Technicolor intends to implement the debt restructuring provided for by the Agreement in Principle in the framework of an SFA plan which remains subject to conditions precedent as further detailed below, in particular to a favorable vote by an extraordinary shareholders' meeting of the Company (the "EGM") on certain aspects of the SFA plan, and to French court approval.
The Agreement in Principle sets forth the following key principles (the “Restructuring”):
The Agreement in Principle has received the support of the Board of Directors of the Company. It remains subject to the finalization of the negotiations of its terms as well as negotiations of the necessary documents and agreements.
Implementation of the Agreement in Principle remains subject also to the usual conditions precedent,which include obtaining the favorable support of impacted lenders under the Credit Facilities as well as judicial authorizations and approvals, evidenced at each of the steps of the proceedings. In essence:
The information contained in this press release and its appendices and annexes is designed to re-establish, in all material respects and where necessary, equal access for the various shareholders and investors to the information relating to the Group.
June 22nd |
Opening of the SFA |
June 29th |
Publication of the EGM meeting notice (SFA rules allow a shorter publication timeline than usual) |
July 3rd |
Financial Creditors Committee votes on the SFA plan (minimum majority: 2/3 in value) |
July 10th |
Approval of the prospectus by the AMF and availability of the independent expert report |
Around Mid July |
First drawdown of the New Money facility for an amount of c. €240 million to repay the Bridge Loan and address the short term liquidity needs of the Group (subject to a positive vote of the financial creditors committee, approval of the judge and other conditions) |
July 20th |
Extraordinary shareholders’ meeting to vote on the capital increases and the Fiducie implemented for the Balance FR New Money |
End of July |
Court approval of the SFA plan (subject to financial creditors’ committee favourable vote at a 2/3 majority and favorable EGM vote) |
End of August |
Second drawdown of the New Money facility for the remainder, i.e. c € 180 million (subject to, among other conditions, approval of the SFA plan or continuation plan by the Court ) |
September |
If Court approval on the SFA plan is received, launching of the capital increase and allocation of warrants |
2020-2022 Reforecast
Continuing operations - post IFRS 16 |
|||||||||
Base Case |
High Case |
||||||||
|
|
|
|
|
|
||||
€m ; FYE-Dec post-IFRS 16 |
2019a |
2020e |
2021e |
2022e |
2020e |
2021e |
2022e |
||
|
|
|
|
|
|
|
|
||
Revenues |
3,800 |
3,118 |
3,476 |
3,632 |
3,274 |
3,820 |
4,035 |
||
% Growth |
(17.9%) |
+11.5% |
+4.5% |
(13.9%) |
+16.7% |
+5.6% |
|||
Adj. Continuing EBITDA |
324 |
169 |
340 |
425 |
255 |
471 |
578 |
||
% of revenues |
8.5% |
5.4% |
9.8% |
11.7% |
7.8% |
12.3% |
14.3% |
||
Adj. Continuing EBITA |
42 |
(64) |
105 |
202 |
20 |
236 |
342 |
||
% of revenues |
1.1% |
(2.1%) |
3.0% |
5.6% |
0.6% |
6.2% |
8.5% |
||
Continuing FCF* |
(26) |
(162) |
89 |
259 |
(47) |
223 |
402 |
||
|
|
|
|
|
|
|
|
||
* Before financials results and tax |
Operating activities trends
18-month liquidity forecasts to December 2021
As of the end of each semester, for the next four closings, the Group expects the following cash position in the next 18 months (taking into account the €420 million New Financing).
in m€ |
June 30 |
December 31 2020 |
June 30 |
December 31 2021 |
|
Group Cash before Credit Lines (CL) |
(323) |
(311) |
(582) |
(386) |
|
Available CL as per current structure4 |
418 |
318 |
318 |
318 |
|
Liquidity after Credit Lines |
96 |
7 |
(264) |
(68) |
|
|
|||||
(+) New financing, net of O.I.D and underwriting |
0 |
420 |
420 |
420 |
|
Pro Forma Liquidity |
96 |
427 |
156 |
352 |
Based on the proposed new financing plan, gross debt5 is to decrease from current position of € 1,444 million to €1,102 million. Net debt to EBITDA target (post IFRS 16 adjustments) is around 3x at end of 2021, decreasing thereafter.
###
An analyst conference call hosted by Richard Moat, CEO, and Laurent Carozzi, CFO, will be held today, Monday, 22 June 2020 at 5pm CEST.
The presentation slide slow is available on our website https://www.technicolor.com/Presentation06-22
or http://www.technicolor.com
The trading of the shares on Euronext Paris will resume tomorrow, June 23rd, 2020, at 9 a.m. CEST.
###
Appendix
Continuing operations - pre IFRS 16 |
|||||||||
Base Case |
High Case |
||||||||
|
|
|
|
|
|
||||
€m ; FYE-Dec pre-IFRS 16 |
2019a |
2020e |
2021e |
2022e |
2020e |
2021e |
2022e |
||
|
|
|
|
|
|
|
|
||
Revenues |
3,800 |
3,118 |
3,476 |
3,632 |
3,274 |
3,820 |
4,035 |
||
% Growth |
(17.9%) |
+11.5% |
+4.5% |
(13.9%) |
+16.7% |
+5.6% |
|||
Adj. Continuing EBITDA |
246 |
101 |
280 |
372 |
187 |
411 |
525 |
||
% of revenues |
6.5% |
3.3% |
8.0% |
10.3% |
5.7% |
10.8% |
13.0% |
||
Adj. Continuing EBITA |
36 |
(71) |
99 |
196 |
13 |
230 |
336 |
||
% of revenues |
0.9% |
(2.3%) |
2.9% |
5.4% |
0.4% |
6.0% |
8.3% |
||
Continuing FCF* |
(90) |
(170) |
42 |
219 |
(102) |
176 |
362 |
||
|
|
|
|
|
|
|
|
||
* Before financial results and tax |
###
Warning: Forward Looking Statements
This press release contains certain statements that constitute "forward-looking statements", including but not limited to statements that are predictions of or indicate future events, trends, plans or objectives, based on certain assumptions or which do not directly relate to historical or current facts. Such forward-looking statements are based on management's current expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially from the future results expressed, forecasted or implied by such forward-looking statements. For a more complete list and description of such risks and uncertainties, refer to Technicolor’s filings with the French Autorité des marchés financiers.
###
About Technicolor:
www.technicolor.com
Technicolor shares are on the Euronext Paris exchange (TCH) and traded in the USA on the OTCQX marketplace (OTCQX: TCLRY).
Investor Relations
Christophe le Mignan: +33 1 88 24 32 83
Christophe.lemignan@technicolor.com
€250m RCF, $125m ABL and up to end of July $110m Bridge Facility