Orpea skips dividend, signs new financing deal to handle debt

By Diana Mandia

(Reuters) -French care home group Orpea, which faces criminal complaints over how treats its elderly residents, said it would pay no dividend on 2021 earnings and disclosed an emergency deal with banks to handle major debt repayments.

At the centre of allegations of malpractice that it has repeatedly denied, the group said that with access to financial markets being closed off and a planned asset disposal programme slowing down, it had signed an agreement with its banks for a secured syndicated facility for a total of 1.73 billion euros.

Orpea said the financing package was part of a conciliation procedure with its creditors and was ordered by the Nanterre commercial court in April.

Orpea's major debt repayments include 850 million euros maturing in the second half of 2022 and 983 million in 2023, the group said on Friday in an earnings statement.

"This emergency financing is at a nearly-doubled cost, showing a worrying forecast," AlphaValue's analyst Yi Zhong told Reuters.

The new facility will weigh on Orpea, as the average cost of these loans will be Euribor +3.9%, compared to a current average cost of funding at 2.2%, Orpea said.

Orpea's shares reversed course to gain 3.7% at 1010 GMT after falling more than 7% earlier.

Orpea saw net profit plunge to 65.2 million euros in 2021, from 160 million euros a year earlier and its net financial debt increased by 1.23 billion euros to 7.89 billion euros end 2021.

In order to reduce debt, Orpea plans to sell more than 3 billion euros worth of assets by end 2025, with at least 1 billion euros of disposals by the end of 2023, predominantly in real estate in the form of sale and leasebacks.

The firm, which operates across 23 countries and is one of Europe's biggest for-profit care home operators alongside French rival Korian, has a real estate portfolio valued at more than 8 billion euros.

DECLINE IN OCCUPANCY RATES IN FRANCE

Orpea shares have plunged since a book by an investigative journalist in January revealed severe failings in care in an Orpea nursing home in a wealthy Paris suburb.

The book has sparked debate on the treatment of elderly people in privately run care homes and the government plans to audit France's 7,500 retirement homes over the next two years.

The government said in March it planned to file a criminal complaint against Orpea.

Amid what Orpea called "a difficult backdrop", its nursing homes business in France recorded a decline in occupancy rates during the first quarter, while the rest of the group's activities saw occupancy rates on an upward trend.

Orpea said it expects its revenue to continue to benefit from numerous new site openings in 2022, in line with a target of more than 3,000 new beds over the period.

(Reporting by Diana Mandiá, additional reporting Dina Kartit,Editing by GV De Clercq and David Evans)