Cerba Seeks Court-Backed Talks to Tackle About €5 Billion of Debt
Summary:
- Cerba Healthcare asked a French court to open conciliation proceedings as it works through about €5 billion ($5.8 billion) of debt.
- The company has started pricing talks with France's National Health Authorities and expects "first outcomes" by the end of this month.
- S&P called Cerba's debt "unsustainable" in July and said it expects a default within 6 months given its "tight liquidity position and weak cash flows".
What Cerba filed and why
Cerba has requested court-supervised restructuring in France to address a roughly €5 billion debt load, according to a document reviewed by Bloomberg News. The plan was detailed in an earnings deck shared with creditors on Thursday.
Pricing talks, timeline and who's talking
Representatives of Cerba and EQT would not comment, and PSP Investments, a minority shareholder, did not provide a response to requests for comment right away. The company said it has opened talks on pricing with the National Health Authorities in France, with "first outcomes" anticipated before month end. France subsidizes private labs via tariffs for medical tests, and a French supervisory body last year recommended cutting reimbursement levels.
When the company last updated lenders in April, it expected clarity on pricing by May or June. Talks on the capital structure and on shoring up liquidity will continue over the coming weeks, per the presentation.
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Ratings, liquidity and recent moves
S&P Global Ratings described Cerba's debt as "unsustainable" in July and said it expects a default within the next 6 months because of a "tight liquidity position and weak cash flows." Last month, Cerba reached a deal to extend the grace window on interest payments until November. Earlier this year, a €100 million loan was supplied by its private equity backers to shore up cash. As of June, the company had access to about €108 million of cash.
The numbers and what it means for your money
Second-quarter results released Thursday showed EBITDA of more than €122 million, up about 12 percent year over year, and revenue of roughly €469 million, an increase of around 2 percent. Net debt is above €4.9 billion, which is 9 times earnings generated for the twelve months through June. That leverage explains the rush to formalize talks. If you're watching European healthcare credits, keep an eye on the pricing outcome with French authorities and the court process - those two levers will do the most to shape recovery prospects and refinancing paths.
