Thu 02/04/2021 12:59 PM
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Relevant Documents:
Press Release
Q1’21 Trading Update
FY’20 Trading Update
FY’20 Annual Report


France-headquartered holiday accommodation company Pierre & Vacances has started conciliation proceedings with its creditors after forced closures of sites after Covid 19 halted income and raised questions about the company’s future cash generation. The company has appointed Rothschild as financial advisor while Gibson Dunn is providing legal advice to shareholders, sources told Reorg. Continue reading for the EMEA Middle Market by Reorg team's update on Pierre & Vacances, and request a trial for coverage of stressed, distressed and high-yield credits in the region. 

The Commercial Court of Paris opened a conciliation procedure for the company and some of its subsidiaries on Feb. 2 for a four-month period, which may be extended. The procedure will take place under the aegis of a conciliator and aims to provide a framework for amicable discussions with the group's main stakeholders.

The company is reviewing measures to strengthen its equity capital. The group’s liquidity covers its shorter-term maturities, but questions remain about cash generation and future liquidity as the timetable for the rebound of its touristic activities is being postponed due to the Covid-19 crisis, sources said.

As of Sept. 30, the company had €205.3 million of cash and had €234 million of availability under its credit facilities. This includes a €200 million RCF that was undrawn on Sept. 30. The revolver was initially due in March and extended to September 2022. Lenders waived a Sept. 30, 2020, covenant test and are open to renegotiations for the test in September 2021 based on Covid-19 impacts.

The group has a €240 million prêt garanti par l'État, or PGE loan, that is 90% guaranteed by the French state, with an initial maturity of June 2021 that can be extended to 2026, and a €100 million convertible bond due April 2023. It has two smaller illiquid instruments through private placements including a €76 million bond maturing in 2025 that was quoted at 107 and a €60 million bond expiring in 2022 that was quoted at 113. The company’s €100 million convertible bond was quoted at 47, though none of these bonds have been traded recently.

The company’s capital structure is below:
































































































































































Pierre Et Vacances SA


09/30/2020

EBITDA Multiple

(EUR in Millions)

Amount

Maturity

Rate

Book


€240M PGE Loan 1

240.0

Jun-10-2021


€36.6M Bridging Loans 2

36.6



€60M Private Placement

60.0

Dec-31-2022

4.250%

€12.5M Propery Development Loan

12.5

Dec-30-2023

2.000%

€100M Convertible Bond 3

100.0

Apr-01-2023

2.000%

€76M Private Placement

76.0

Feb-14-2025

3.900%

Total Debt

525.1


Bank Overdrafts

7.0



Total Bank Overdrafts

7.0


Lease Liabilities

2,884.2



Total Lease Liabilities

2,884.2


Total Debt

3,416.3


Less: Cash and Equivalents

(205.3)

Net Debt

3,211.0


Plus: Market Capitalization

104.4

Enterprise Value

3,315.3


Operating Metrics

LTM Reorg EBITDA

82.9


Liquidity

RCF Commitments

234.0

Plus: Cash and Equivalents

205.3

Total Liquidity

439.3

Notes:
Capital structure is post IFRS-16. Liquidity comprises 5 undrawn credit lines with €234M available. This includes amounts under an undrawn €200M RCF that was initially due in March 2021. The maturity has been extended to Sept. 2022.
1. French state guarantee for 90% of the amount borrowed. There is the possibility the group could extend maturity of the loan to 5 years.
2. Rate based on 3 month Euribor plus an undisclosed margin. €5.5M matured on Sept. 30, 2020. Remaining maturities are as follows: €0.8M on Aug. 2, 2021; €27.7M on Dec. 2, 2022; €2.6M on Feb. 16, 2023.
3. Convertible subject to conditions until 25 May 2021. Following this date the bond is then convertible at any time.



Reflecting the impact of IFRS 16, Pierre & Vacances also had €2.884 billion of leases on its balance sheet as of its last financial-year end in September.

The lease maturity schedule is below:

Recent Performance

Pierre & Vacances offers tourism services through holiday accommodation in the form of self-catering apartments, hotels, holiday villages, leisure activity residences and cottages. The Pierre & Vacances-Center Parcs Group operates a tourism network of more than 45,800 homes and apartments in 282 sites in Europe with its flagship brands Pierre & Vacances, Center Parcs, Sunparks, Villages Nature Paris, Aparthotels Adagio and Maeva.com. Center Parcs Europe was acquired by Pierre & Vacances in 2001.

In the last two weeks of December, despite good performances by the seaside sites, mainly in the French West Indies, revenue dropped almost 80% due to the ongoing closures of the Center Parcs domains in Germany and Belgium, a deteriorated offer at the sites operated (no catering or access to pool areas) and the opening of just nine mountain residences (or 15% of the group’s offer in this destination), due to the closure of ski-lifts, according to company’s first-quarter trading update.

The group’s tourism business is based around winter (November to April) which accounts for about 40% of the group’s annual revenue and summer (May to October) being the group’s main activity. The fourth quarter of the financial year alone accounts for more than 35% of annual revenue.

In the first quarter of financial year 2021 ended Dec. 31, total revenue on an operating reporting basis dropped 55.4% year over year to €167.2 million, with tourism revenue falling 63.6% year over year to €102.7 million. During the quarter, revenue at Pierre & Vacances Tourisme Europe declined 67.9% year over year to €30.9 million, while Center Parcs Europe revenue decreased 61.3% year over year to €71.8 million. In the first quarter, 50% of Adagio aparthotels remained closed.

Property development revenue fell to €64.4 million in the first quarter, compared with €93.1 million in the year-earlier period, stemming primarily from the Senioriales residences (€16.9 million), the Center Parcs Lot-et-Garonne domain (€7.9 million) and Center Parcs renovation operations (€26.9 million). Property reservations recorded in the first quarter of the year with individual investors represented sales volume of €51.9 million, versus €78.5 million in the year-earlier period.

Given the current health measures in place, the group said it has stepped up measures to protect its cash through strict steering of spending and investments, increased use of short-time working measures and through the evolution of rents depending on the periods of administrative closure of all or part of the sites.

From March to June last year, the group incurred a revenue loss of more than €300 million from site closures as a result of the Covid-19 pandemic, the company said in its full-year 2020 report.

For financial year 2020, revenue dropped 26.5% to €1.171 billion on an IFRS basis, comprising €982.4 million for the tourism activities and €189.1 million for the property development activities, according to the company’s annual report. On an operating reporting basis, full year revenue dropped 22.4% to €1.298 billion.

Levered cash from operations in the financial year was €11.1 million, up from €61.2 million year over year. This was driven by a €73.7 million working capital inflow.

A simplified organizational structure as of Sept. 30, as per the company’s annual report is below:

Out-of-Court Proceedings

When a debtor in France is in financial difficulties but is not yet insolvent according to the French cash flow insolvency test, the debtor can request the French court to appoint an insolvency practitioner (in the capacity of mandataire ad hoc) to help the debtor’s management negotiate a restructuring with all or part of its creditors, suppliers and possible new investors in the framework of a mandat ad hoc.

There is no statutory limitation to the length of the process which can be extended. The role of the mandataire ad hoc is to make suggestions and to persuade creditors to negotiate with the debtor but lacks any final or coercive powers. The process is informal, confidential and purely contractual in nature. There is no court-imposed stay of payments by the debtor or a stay of enforcement proceedings. The mandat ad hoc proceedings may be converted into conciliation proceedings in order to benefit from the features of the formal approval of the restructuring agreement in conciliation proceedings.

An alternative option is for the debtor to apply to the French court for the appointment of a conciliator in the framework of conciliation proceedings to negotiate a voluntary arrangement with key stakeholders. The conciliation process is informal, confidential and purely contractual in nature, and does not impose a stay on enforcement.

If, during the conciliation proceedings, a creditor serves a demand or brings an action against the debtor, the court responsible for the conciliation proceedings has the power to grant the debtor a grace period of up to two years pursuant to article 1343-5 et seq of the French Civil Code. The initial term of the conciliator must be within a four-month limit (which can be extended once, for up to one month).

The purpose of both mandat ad hoc and conciliation proceedings is for the debtor to come to a voluntary arrangement with its creditors.

Coining a restructuring plan under conciliation also allows a company and its creditors to envisage implementing it under accelerated financial safeguard (sauvegarde financiere acceleree). This process allows a swift execution of a pre-packed restructuring deal which must be approved by a two-third majority of creditors organized in committees.

--Jaishree Kalia, Connor Lovell, Thomas Baker
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