In line with the agreement announced in January 14, 2014, a conciliation protocol was signed on April 9, 2014 by Gascogne and certain of its subsidiaries with bank creditors, tax and social group, EEM (reference shareholder of Gascogne) and a consortium of investors, structured around Landes companies Biolandes Technologies and the Résiniques and Terpene Derivatives (DRT), accompanied by Bpifrance Participations and the Crédit Agricole Group , grouped together in a joint venture called Attis 2. This protocol concludes discussions conducted under the auspices of the Interdepartmental Committee on Industrial Restructuring (CIRI) since August 2013. The deal provided by the protocol is an opportunity that ensures the operational continuity of Gascogne. The main provisions of the protocol are built around an industrial project, together with a strengthening of capital of Gascogne and debt restructuring.
I. Industrial Plan
The industrial and commercial plan that Attis 2 wishes to implement is the following. It covers the four branches of Gascogne (wood, paper, bags and complex):
In regards of the wood industry, which includes companies of Gascogne’s Forest and Wood Products Gascogne in France, and Gascogne All Wood located in Belgium, the objective is to give solid financial fundamentals necessary for its reversal and prepare for the long-term positioning of activity on sector growth and added value. An investment in a production line of pellets is provided for the recovery of the related products. An investment in a cutting-jointing line will be set up to streamline the existing equipment and allow development on products with higher added value. It is envisaged to reduce the number of industrial sites in the wood sector, such a reduction may take place by closing or assignment.
Regarding the paper industry, which includes French companies Gascogne Paper (Mimizan plant) and Depland (Vienne factory near Limoges), the goal is to get out of dependency of the fossil energy, through an investment in a biomass boiler and prevail in operational efficiency through automation investments that will allow targeted productivity gains.
Regarding the bags industry, which includes the plant the Mimizan and the plant Nantes as well as plants in Germany, Greece and Tunisia, the objective is to strengthen specialist positioning. This repositioning through investment in a 3rd line plastic at Mimizan will follow the growth of the markets and the renewal / modernization of two lines on the website of Nantes.
In regard of the branch complex, which comprising Dax factory and the Linnich plant in Germany, the objective is to accelerate the growth of open markets through investment already directed by Gascogne (machine Dax) group. The financing scheme of the industrial plan and trade based on strengthening capital, essentially through the subscription of Attis 2 to capital increases, as well as the provision of new fundings , as set out below below.
II. Strengthening equity operations building of own funds would result in the issuance of securities and reduction sequence of following capital:
A capital increase that would be released by offsetting receivables acquired by Attis 2 and MES with bank creditors of the group. The capital increase will be made at subscription pricel of € 34.1 million corresponding to the nominal value of the receivables in exchange for the issuance of 1.9 million shares at a price per share of about 17.88 euros (about 12.88 euros per share premium), the price of subscription is being determined relative to the cash surrender value of bank loans (less than the nominal value) to avoid raising investors beyond the redemption value of claims.
A capital reduction due to losses, which would be achieved by reducing the nominal value of Gascogne shares of € 5 to € 2.5.
A capital increase is subscribed in cash with preferential subscription rights (DPS) and allows shareholders the date of the granting of rights to subscribe in priority to the issue of shares. The capital increase would be set at a total of about 10.2 million and realized by the issuance of approximately 4,000,000 shares at a share price of 2.5 euros (without premium issue). Attis 2 and EEM have committed to subscribe and pay increase this capital increase by at least 75% of its amount.
A capital increase is subscribed in cash and reserves to Attis 2 and EEM. The capital increase would amount to a maximum total amount of approximately € 33.6 million and realized by issuing a maxi mum number of approximately 13.4 million shares at a price per share of 2.5 euros (without premium) .
ORAN issuing an amount of about 12.05 million euros to be reserved for certain bank creditors of the group and released by offsetting claims on Gascogne. The maturity date of the ORAN would be 31 December 2023. ORAN will be issued in two separate categories, including the repayment of one would be guaranteed by sureties that are attached to claims which would be mobilized to release the ORAN subscription. ORAN holders will benefit a put option on Biolandes Technologies in 2018 and 2019, and would agree a purchase option in favor of Biolandes Technologies with effect from 1 December 2019 until their maturity date.
In this context, Attis 2 will invest an amount of € 36 million (31.24 million euros for the purposes of capital increases described above, the balance for the acquisition of portion of bank loans capitalized by Attis 2 - cf. step 1 above). For its part, EEM will invest between EUR 8.17 million and EUR 8.96 million euros, as follows:
- Capitalization of current account EEM (granted under the reconciliation of July 2012 and enjoying the privilege of new money) for an amount of € 3.76 million (including interest) entitling to shares worth rated 2.5 euros;
- Capitalization of bank debt in the amount of EUR 1.42 million under the same terms as those relating to the capitalization of bank loans acquired by Attis 2 (see step 1 above);
- Investment in cash in an amount between 4.21 million and € 5.00 million entitling to shares with a nominal value of 2.5 euros. Following the recapitalization of Gasco ESG, which is subject to shareholder approval of Gascogne, Attis 2 holds a stake of at least two thirds of the share capital and voting rights of Gascogne, and the participation of EEM would be reduced by about 28.9% of the capital as a percentage of about 20% of capital in Gascogne. As a purely illustrative example, assuming the purchase 100% of the capital increase with preferential subscription rights referred to in step 3 above, the participation of a shareholder who holds to this day 1% of capital office of Gascogne would be reduced to 0.19% if it decided to subscribe to the capital increase in the amount of its total DPS, and 0.09% if it decided not to subscribe. In case of full repayment in Gascogne stocks, news of ORAN, the participation of such shareholder would be reduced in two assumptions described above, respectively 0.17% and 0.08% of the share capital of Biscay.
III. Debt restructuring
Following the restructuring, the existing debt has been partly relieved and partly extended. The restructuring provided in the conciliation protocol would reduce gross debt, which stood at around € 162 million at 31 December 2013, approximately 118 million euros (excluding nominal value of ORAN which will amount to 12.1 million euros) to the date of completion of all operations.
New additional funding in the amount of € 30.5 million, subject of restructuring, will be available to Gascogne group to participate in the investment program and the implementation of the new strategy group.
As part of this restructuring process, the structure of short-term financing was renegotiated and a new factoring agreement covering all the activities of French companies was established in substitution of revolving loans and other existing financing. This agreement makes it possible to consolidate short-term funding and increase from 5 to 6 million euros.
IV. Precedent Conditions
Investment commitments and debt restructuring under the protocol were made subject to the fulfillment of precedent conditions, purged of appeal, as appropriate, the main ones are the following:
- Obtaining a fairness opinion from an independent expert appointed by the Board of Gascogne and responsible for deciding on the fairness of the proposed transaction described in section II above;
- Provision by the AMF in favor of Attis 2 and DRT a derogation under Article 234-9 2 of its General Regulations to the requirement to file a tender offer for the shares of Gascogne which triggers the requirement to file a draft offer;
- Obtaining the permission of the competent authorities in merger control;
- Approval by the general meeting of shareholders of Gascogne to draft resolutions necessary for the realization of securities issues and the reduction of capital referred to in the protocol;
- Granted by the Commercial Courts of Dax and Mont-de-Marsan to lenders, the privilege of conciliation under the provisions of Article L. 611-11 of the Commercial Code.
Under the conciliation protocol, the realization of all conditions precedent must occur before July 21, 2014, if the agreement shall lapse as of right.
In addition, the conciliation protocol will also void of right in case of declaration of insolvency or open request backup of Gascogne and/or one of its subsidiaries or the occurrence, by the date on which probate judgments will be free of any appeal, an event that would be likely to adversely and significant modify the industrial and commercial plan, Attis 2, and its funding.
It is envisaged that the company’s general meeting will be convened in mid-June and the financial restructuring will take place until September 2014.