Solocal Starts $1.3 Billion Debt Overhaul Under French Court

Solocal Group began a court-backed process to restructure 1.1 billion euros ($1.3 billion) of debt, its second reorganization in about two years.

The French directories publisher asked the Commercial Court of Nanterre to appoint a restructuring adviser, triggering a default event on 350 million euros of June 2018 bonds, according to a statement Thursday. The Paris-based company’s shares and bonds tumbled.

Solocal, previously called PagesJaunes, has warned it won’t be able to repay debt due in 2018 as online services lure users from traditional print directories. The publisher, which reorganized 1.6 billion euros of borrowings in 2014, has also struggled to invest in digital products because of its debt pile.

There is “an urgent need for drastic debt reduction,” Alexandre Koller, an equity analyst at Gilbert Dupont, wrote in a note to clients. Koller said he was stopping coverage of the company due to a lack of visibility in digital growth and the potential for stock dilution from a debt-reduction plan.

Solocal said it risks breaching loan covenants as soon as the end of June. It plans to ask holders of bonds issued by a financing vehicle to become direct creditors so they can take part in restructuring talks, according to the statement.

Potential Investment

Discussions are under way with potential investors about injecting new money as part of a reorganization, which will dilute current shareholders, the company said last month.

The publisher’s stock tumbled as much as 8.8 percent to 2.652 euros in Paris trading. The June 2018 bonds dropped five cents to 51 cents on the euro, according to data compiled by Bloomberg.

A group of Solocal creditors has hired Houlihan Lokey as a financial adviser for the upcoming debt talks. Weil Gotshal & Manges will provide legal advice.

Solocal has turned to a so-called mandat ad hoc, which is an option available to solvent French companies that are facing financial difficulties. The adviser, or mandataire, helps companies and creditors find a consensual debt-restructuring agreement.

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