France recently introduced a new, fast-track insolvency procedure called “accelerated safeguard”. The Alma restructuring was a major test case for this new procedure. It allowed the cram-down of dissenting creditors and minority shareholders (including forcing through the relevant shareholder resolutions with a simple 50% majority) – and all within a short timeline.
France has recently undergone a number of changes in insolvency law, in a succession of reforms implemented from 2005 up to last year.
In this respect, the latest major reform was the Governmental Decree No 2014-326 of March 12, 2014, which, amongst other changes, introduced a fast-track form of the safeguard procedure called the accelerated safeguard. This fast-track procedure has a much wider scope than the previous accelerated financial safeguard (which is still in force and used for purely financial restructurings).
Alma Consulting Group’s restructuring was a significant test case for this new procedure. The complexity, length of negotiations (3 years), significant amount of debt restructured and the number of stakeholders in the case gives it a special place among the restructuring cases in France over the last few years.
Following a third LBO carried out at the end of 2007, the Alma Group’s financial holding companies (HAMAC and ACG Holding) remained heavily indebted in an approximate amount of € 750 million. Whilst the Alma Group was still generating a good income from its business, changes in the legal and operational environment resulted in a decrease in operational income rendering the debt levels unsustainable.
Several proposals were considered for restructuring the Alma Group’s debt before the senior lenders organised themselves into a coordinating committee (CoCom) in 2013. The CoCom (comprising Babson, CIC, ICG, NAC, NIBC Bank and M&G) put forward a plan to take over the group through a lender–led restructuring.
A conciliation procedure had failed to yield unanimous agreement to the proposed lender–led restructuring (despite the consent of 97% of creditors and stakeholders). The Commercial Court of Nanterre therefore opened two accelerated safeguard procedures in respect of each holding company of the Alma Group, HAMAC and ACG Holding.
Use of “accelerated safeguard” procedure
The new procedure and the new rules enabled the settlement of the whole debt within a short timeframe and allowed the cram down of not only dissenting creditors but also the eventual blocking minority of shareholders. They were therefore particularly appropriate for use in the Alma restructuring.
Furthermore, the new rules enabled the Court to authorise the judicial administrator to convene the relevant shareholders’ meetings to approve the share capital operations (required for the implementation of the lender–led restructuring) and force through the relevant resolutions with a simple 50% majority rather than the two thirds normally required under French corporate law.
The operation allowed the Alma Group to reduce its debt to € 100 million and defer repayment of the remaining debt until 2020. The senior lenders gained an 80% stake in the Alma Group with remaining stake being held by the management. The deal closed in December 2014.
The company’s turnaround is best shown by the projected profits of € 168 million for 2014, its new objective to reach € 200 million by 2017 and its recent acquisition of Lowendalmasaï, one of its direct competitors and one of the top companies in Alma’s market.
Weil, Gotshal & Manges advised the debtor (Rodolphe Carrière, associate, advising on restructuring aspects of the transaction, and Emmanuelle Henry, partner, and Pierre-Alexandre Kahn, associate, advising on corporate aspects of the transaction).