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Cegedim Said to Consider Asset Sales to Aid Loan Repayments

Cegedim SA, a French information-services provider to the medical industry, has identified three non-core assets it could sell to help cover loan repayments in the next two years, according to a person with knowledge of the plans.

The Boulogne Billancourt, France-based company, which has 471 million euros ($610 million) of debt, is considering selling Cegelease, which provides leases for pharmacies, Réseau National de Promotion, a point-of-sale pharmaceutical advertising company, and SRH, a human resources and billing software outsourcing service, said the person, who asked not to be identified as the plans aren’t public.

Cegelease and RNP together generated about 122 million euros of revenue in 2011, according to the company’s most recent annual report.

Cegedim, which provides databases to doctors and pharmacies, must repay 40 million euros of debt in 2012 and 2013 and has 80 million euros of annual capital expenditure, according to estimates in an Oct. 9 report from Standard & Poor’s.

The company expects to generate sufficient cash to cover its loan payments and the asset sales would provide additional headroom, the person said. It is also considering refinancing its loans instead of the disposals, said the person.

Cegedim would consider asset sales if there is a mismatch between free cash flow and amortization of the term loan at the end of next year, a company spokesperson said in an e-mailed reply to questions, who asked not to be identified citing company rules.

Covenant Reset

The information provider, more than 50 percent owned by founder Jean-Claude Labrune and his family, secured additional breathing space on its loan terms earlier this month. In return for higher interest payments Cegedim can keep its leverage ratio at as much as 3.6 times earnings and its interest cover ratio at least 3 times earnings for the period to December 2012. The price of its outstanding bonds jumped about 8 percent to 94.71 cents on the euro after the news of the so-called covenant reset, Bloomberg prices show.

Banks led by BNP Paribas SA, Credit Agricole SA and Societe Generale SA provided 280 million euros of loans in June 2011, including a 200 million-euro term loan and an 80 million-euro credit line, according to data compiled by Bloomberg. The term loan now totals 160 million euros, the data show. Half of the credit line has been drawn, S&P said.

The rating company said it was “concerned about Cegedim’s ability to face financial obligations from June 2014”. It ranks Cegedim at B, five levels below investment grade,

Cegedim shares surged as much as 8.6 percent to 15.5 euros in Paris today, before closing at 14.68 euros, giving the French company a market value of 205 million euros.

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