Orpea Creditors Team Up to Stake Claims in Restructuring

Orpea SA's unsecured creditors are working together and consulting with lawyers to assert their rights in the company's complicated restructuring. The move comes after a series of scandals involving the French care home operator.

There are now at least four groups of unsecured creditors. According to people familiar with the matter, who asked not to be named, about ten Chinese and German lenders holding roughly €500 million ($521 million) of Orpea’s German Schuldschein debt have teamed up and are working with law firms Jeantet and Noerr. Another group of at least seven Asian lenders with about €170 million of Schuldschein debt is engaging with Clifford Chance, the people said.

Grandjean Avocats, a French law firm, is in talks with another group, according to separate sources who cannot be named because the matter is private. Grandjean declined to comment. Representatives for Jeantet, Noerr and Clifford Chance did not respond to requests for comment.

This latest group of creditors, who are owed about €1.5 billion, joins a previously-reported group with similar unsecured debt. This includes private placements, straight bonds, convertible bonds and Schuldschein. The group, which is being advised by Eversheds Sutherland LLP and Willkie Farr & Gallagher as legal counsels, and Oddo BHF and PJT Partners as financial advisors, is holding a call on Friday that is open to other creditors.

Orpea is looking to restructure its debt in the wake of a scandal over its treatment of nursing-home residents and allegations of financial misconduct. The company is proposing to convert €3.8 billion of unsecured debt to equity, essentially forcing creditors to sell their holdings at steep discounts, and is also seeking to raise as much as €2.1 billion in fresh funds.

Some creditors are not in favor of the debt-to-equity swap, while others may face legal hurdles in owning equity in a foreign company. Approximately half of the €3.8 billion in unsecured debt is in the form of Schuldschein notes, a type of syndicated loan sold under German law.

Orpea's recent debt troubles have highlighted the risks associated with Schuldschein loans for creditors. In this Q&A, we take a look at the situation and what it could mean for lenders going forward.

Orpea's unsecured Schuldschein debt is quoted at 16.5-19.5% of face value, down from 25% a week ago, while the unsecured bonds are at 20.5-22.5% of par, according to people familiar with the new groups.

Creditors are considering submitting alternative options to Orpea before December 1, according to sources. In similar situations, lenders have proposed postponing interest payments (as in the case of retailer Steinhoff International Holdings NV in 2018) or reaching a standstill agreement (as seen with car-parts maker Benteler International AG in 2020).

Orpea has also invited all lenders to submit indicative offers for a new €600 million secured loan by early December. The company is expecting commitments to be made by mid-January with funding slated for February, according to sources.

Orpea declined to comment when asked about the allegations.