Atos Expands Restructuring Talks After Airbus Deal Collapsed

(Bloomberg) -- Atos SE gave itself until the week of April 8 to present creditors with a refinancing framework as it aims to head off a looming repayment crisis.

The ailing French IT company has expanded its restructuring talks to include bondholders as it seeks a comprehensive agreement on its debt by July, it said in a statement on Tuesday.  

The problems at Atos, a strategic company in France due to its ties with the nation’s military and nuclear industry, swelled after it failed to raise funds to address €3.65 billion ($3.96 billion) of debt due by the end of 2025. Talks to sell its legacy IT services unit to Czech billionaire Daniel Kretinsky’s EPEI ended without a deal, and Airbus SE this month walked away from a deal to buy its big data and cybersecurity business.

“We’re all working toward the same goal, with all our creditors working with us,” Atos Chief Executive Officer Paul Saleh said on a call with reporters on Tuesday. “On this point I have no worries, we’ll come up with a global solution by July.”

Its bond due in 2025 dropped 5 cents on the euro to 16 cents on Tuesday, the lowest since issuance in 2018, according to data compiled by Bloomberg. Shares in Atos fell 7.2% to €1.59 at 11:08 a.m. in Paris. They are down 77% since the start of the year.

Atos said it has sufficient liquidity to operate the business until a refinancing plan is reached. Free cash flow was negative €1.08 billion in 2023, from negative €187 million in the previous period, and it didn’t provide guidance for this year.  

Bondholders will participate in the amicable conciliation procedure, which by law has four months to reach an agreement and can be extended by another month, according to the statement. The French government is part of the negotiations, which are brokered by court-appointed mediator Helene Bourbouloux.

The company said it’s also in discussions with creditors regarding interim financing so it has more runway to find a permanent fix.

Atos debt repayments are set to spike through 2025, with a €500 million convertible bond coming due in November, a €750 million bond maturing in May 2025 and €2.4 billion of bank debt due next year, as well as some longer-term debt. 

What Bloomberg Intelligence Says:

Atos may be nearing clarity on its debt obligations, aiming to reach a refinancing plan by July via a conciliation procedure with banks and bondholders. The company has debt totaling €3.65 billion maturing by end-2025, beginning with a €500 million convertible bond due Nov. 6. Free cash flow was €1.1 billion negative in 2023, and though management has provided no 2024 guidance, it has said there’s sufficient liquidity to operate until a refinancing deal is reached.

— Tamlin Bason, BI TMT analyst 

The company said its 2023 financial statements have been audited and it expects the resulting report will include a section about the material uncertainty related to the going concern. 

All of Atos’s financial debt is unsecured. As part of the restructuring, the company could offer more security to creditors willing to provide new funds. The company did not say whether the restructuring could involve a haircut for creditors or a debt conversion into equity. 

Atos is “actively evaluating strategic alternatives, having received several expressions of interest or indicative offers relating to various perimeters,” according to the statement. 

Impairment Charge

Atos on Tuesday reported a loss of €3.44 billion last year, from a loss of €1.01 billion in 2022. The results included an impairment charge of €2.55 billion and reorganization costs of €696 million as it split its business into two units. The company also confirmed its previously reported 2023 results.

In February, Atos reported preliminary 2023 revenue was €10.69 billion, below an estimate of €10.89 billion among analysts surveyed by Bloomberg.

France’s finance ministry has said it will find a national solution to protect the strategic activities of Atos, especially its sensitive activities, in particular the Big Data & Security unit that Airbus considered buying. 

A candidate to rescue Atos is David Layani, the head of Atos’s top shareholder Onepoint. Layani told Le Figaro newspaper on Sunday that he is prepared to lead the recapitalization of the whole group with the support of its employees.

Meanwhile, Kretinsky is considering a renewed takeover offer for parts of Atos after he walked away from his previous bid, Bloomberg reported in February.

(Updates with details throughout)

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