(News Bulletin 247) – The digital services company, which faces more than 3.6 billion euros in debt to refinance, has given itself several months to negotiate with its creditors under the aegis of a conciliator. But the upcoming restructuring risks being very dilutive for the group’s shareholders.

When a company publishes its annual results at the end of March, it is not necessarily a good sign. Where applicable with Atos which had to postpone this meeting several times before finally delivering its accounts this Tuesday March 26.

The digital services company had previously communicated the main points anyway. We have just learned that the company suffered a net loss of 3.4 billion euros (around twenty times the current capitalization of the company), most of which is due to asset depreciation (2.5 billion euros). Let’s also remember that the company burned 1.08 billion euros of cash in 2023.

The group has also not given an outlook for 2024, citing in particular “market uncertainties” and “the planned sale of assets”.

The company’s main announcement, however, has nothing to do with the financial results and formalizes an outcome that had little doubt.

While the company is burning cash, Atos has a net debt of 2.23 billion euros (4.65 billion euros gross) and finds itself with a wall of loans to refinance, for a total of 3 .65 billion euros by the end of 2025.

The group has therefore opened an amicable conciliation procedure with its creditors to achieve a financial restructuring of its debt.

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Towards a restructuring by July

A conciliation procedure takes place under the aegis of a conciliator, in this case for Atos master Hélène Bourbouloux, a judicial administrator who officiated in the Orpea and Casino files. The conciliator must encourage negotiations between the creditors and the company to reach an amicable agreement which would put an end to its difficulties and ensure its sustainability.

The Atos conciliation procedure will last four months with possibly an additional month.

The company also intends to present to its creditors during the week of April 8 “the parameters of its refinancing framework” while keeping the market informed. Atos plans to achieve a financial restructuring by July.

Following these announcements, Atos shares lost another 6.8% to 1.5945 euros around 10:15 a.m. on the Paris Stock Exchange.

Soon a price of a few tens of cents?

The opening of this procedure seemed inevitable after the failure of the sale of the BDS division (cybersecurity, big data, supercomputers) to Airbus last week. The airline group’s withdrawal from this sale project deprived Atos of sale proceeds of 1.5 billion to 1.8 billion euros (in enterprise value).

For the moment, Atos believes it has sufficient liquidity to meet its needs over the next twelve months. The company also intends to pursue asset sales to strengthen its liquidity.

However, the group still recognizes that there is danger ahead. “All these circumstances (financial, editor’s note) create significant uncertainty over the group’s ability to continue its activity as a going concern in the event that the group is not able to negotiate a new refinancing plan or carry out a program important asset sale”, we can read in the group’s press release.

A financial restructuring will therefore be necessary for Atos to clean up its balance sheet. Investors will therefore have a little more visibility on the potential terms of this plan in a few days.

But a strong dilution of current shareholders seems difficult to avoid. “The only alternative to dilution was asset sales. But the sale of BDS failed and it will be difficult to carry out large sales in just a few months. As a result, it will certainly be necessary to convert debt into capital, which which will weigh down shareholders,” explains an analyst.

A scenario that Societe Generale seems to be preparing for. The bank significantly slashed its price target on Atos on Monday, going from 10 euros to 20 cents, with a “sell” advice. A target more than 85% lower than Atos’ current stock price (1.5945 euros). And to think that the title was worth more than 100 euros seven years ago….