Editoria e Media
Agreement in Principle on Financial Restructuring Plan
PRESS RELEASE
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% ) 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 debt 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.
1. Status of the restructuring process
In February 2020, Technicolor informed the market of its intention to launch a €300 million rights issue by June 30 2020 at the latest, which was authorized by the general meeting of the Company's shareholders on March 23 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 31 .
Technicolor has received offers both from third parties and from existing creditors, including notably, as announced in the June 4 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 2 . 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 5 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 11 , 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 18 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.
2. Key Transaction Principles
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.
3. Next steps : based on legal timetable ( indicative calendar)
4. Key business trends
2020-2022 Reforecast
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).
Based on the proposed new financing plan, gross debt 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.
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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 23 , 2020, at 9 a.m. CEST.
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Appendix
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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.
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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
On the basis of an exchange rate (€/$) of 1.1193
Before IFRS operating lease debt
Unlike previous year, H2 2020 is not expected to be FCF positive due to Covid-19 impact on the Group activities and working capital pattern
€250m RCF, $125m ABL and up to end of July $110m Bridge Facility
Before IFRS 16 operating lease debt
Attachment
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