Thu 05/27/2021 07:33 AM
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Relevant Documents:
FY’20 Report 23/05
Q1’21 Results
Audit Committee Decision 21/05
Solutions 30 Audit Investigation
Solutions 30 Files Defamation Suit
Open Letter to Shareholders
Muddy Waters Open Letter

French-listed outsourcing company Solutions 30 is in talks with investment banks as it seeks a new investor. The company said it could be taken private following its recent accounting issue with its auditor EY.  Continue reading as our EMEA Middle Market team analyzes Solutions 30 seeking new investment and request a trial for access to our coverage of thousands of other stressed/distressed debt situations as well as access to the linked documents throughout this article.

The company published its unaudited 2020 annual report on May 24 after EY refused to certify the accounts because it hadn’t been given the information necessary to perform the audit, EY said.

After the report was released, much of the company’s €1.1 billion market value was wiped out as the shares began trading again following a two-week halt.

Solutions 30, which reported a 18.5% year-over-year increase in revenue to €819.3 million in 2020, said it “strongly disagrees” with EY’s reasoning, and emphasized that EY had not rejected or qualified the accounts. It said that the auditor’s opinion, as expressed, is the only element that could eventually trigger an early repayment of the company’s debt.

Last month, an independent investigation by Deloitte confirmed “the unfounded and erroneous nature of the accusations” of fraud against Solutions 30.

A number of hedge funds, including Muddy Waters, Lansdowne Partners and Gladstone Capital had built up short positions on Solutions 30, according to French outlet Agefi. Activist hedge fund Muddy Waters had previously warned of Solutions 30’s alleged ties to money laundering in an open letter in December.

In a letter to shareholders last month, Solutions 30 said “the hedge funds that are attacking us operate in packs and distort the facts with total impunity. Solutions 30 will no longer respond to this misinformation campaign.” It added “the events around the Solutions 30 stock, where nearly €1 billion in market capitalisation has been destroyed, are an absolute scandal.”

Solutions 30 is an outsourcing company which provides telecoms, IT, energy and security services for clients across Europe.


On May 23, Solutions 30 published its 2020 annual report despite EY refusing to certify the accounts after claiming it lacked the necessary information.

Solutions 30 had been under pressure by the Luxembourg regulators, the Autorité des Marchés Financiers, after it failed to publish its annual results within the four month framework following the end of the financial year, in accordance with regulations.

Solutions 30’s shares, which were suspended on May 10 at the company’s request, reopened on May 24 and fell as much as 77% to €2.4, according to listings on Euronext. Exchange operator Euronext suspended trading in Solutions 30’s shares several times due to the volatile swings. Euronext said it will continue monitoring Solutions 30 shares after trading resumed. The stock had traded at nearly €20 toward the end of 2020.

Muddy Waters wrote an open letter to Solutions 30 in December accusing the company of questionable transactions with an Italian accountant, Angelo Zito, who was imprisoned for having links with the Sicilian mafia. The letter also raised questions about the company’s investments into businesses owned by related parties.

Solutions 30 opened a lawsuit against Muddy Waters - which has a 'short' position betting on a fall in Solutions 30's shares - accusing it of the publication of letters that made allegations that are false and misleading.

Solutions 30 has repeatedly denied any wrongdoing. It said last month that an independent auditor had confirmed the allegations were unfounded.

Recent Earnings

According to the recent results, which EY refused to sign-off, Solutions 30 reported a 18.5% year-over-year increase in revenue to €819.3 million in the year to Dec. 31, 2020 and EBITDA rose 19.1% year over year to €106.5 million.

A snapshot of the group’s earnings is below:

Solutions 30 said the increase in earnings was due to the acquisition of U.K.-based Comvergent and growth in its telecoms business sector. At the end of 2020, the telecommunications sector accounted for approximately 76% of the group’s revenue.

The group’s revenue growth in recent years:

At Dec. 31, 2020, the company had net debt of €28.9 million including leases, compared with €92.1 million a year earlier. At year-end, Solutions 30 had bank debt of €100 million and its facilities comprise a €130 million loan with a six-year term at 1%, including a €75 million line of credit to finance acquisitions. It had used up to 88% of this financing at Dec. 31, 2020, up from 53% a year earlier.

A summary of the group’s upcoming maturities:

The group’s credit agreement contains early repayment clauses in the event of non-compliance with the agreed covenants, in particular maintaining the net bank debt/EBITDA ratio below a threshold of 2.5x. At Dec. 31, 2020, the group was in compliance with this financial ratio.

EY and Solutions 30 did not respond to Reorg’s request for comment.

The group’s capital structure is below:

Solutions 30


EBITDA Multiple

(EUR in Millions)





€130M Structured Loan (Secured) due 2024 1



Other Bank Debt 2


Total Bank Debt/Earnouts



Lease Liabilities


Total Lease Liabilities



Total Debt



Less: Cash and Equivalents


Net Debt



Plus: Market Capitalization


Enterprise Value



Operating Metrics

LTM Revenue





Other Liquidity


Plus: Cash and Equivalents


Total Liquidity


Credit Metrics

Gross Leverage


Net Leverage


The capital structure is on a post-IFRS 16 basis. LTM reported EBITDA refers to adjusted EBITDA as reported. Market data as of May 26, 2021. Other liquidity refers to the 12% unused amount of structured loan.
1. Calculated as €130M total amount times 88% usage as reported by the company. Assumes part of liabilities from earnouts and put options are part of structured loan.
2. Calculated as €99.9M loans and bank overdrafts as reported plus €24.6M liabilities related to earnouts and put options, less €114.4M outstanding structured loan.

---Andrew Ross, Lara Gibson
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