Yahoo Finance Macron accused of ‘stealth nationalisation’ of French healthcare company
Emmanuel Macron has been accused of pushing through the “stealth nationalisation” of a French private nursing home business by a group of American hedge funds.
Paris-listed Orpea, which has been gripped by scandals including allegations that elderly residents were blocked access to adult nappies and food, is set to be seized by the French state under plans to save the business.
But hedge funds including Fortress Investment Group, co-founded by Aston Villa owner Wes Edens, and Whitebox Advisors, which predicted the global financial crisis in 2008, said Orpea is being deliberately undervalued to force a nationalisation.
“Following Brexit, Europe is supposed to be open for business, but this attempt at stealth nationalisation of a privately owned and financed care provider, which was and remains a viable profitable business, gives a contrary message,” a spokesman for them said.
The French State’s investment vehicle Caisse des Dépôts et Consignations (CDC) is planning to intervene by injecting more than €1bn (£860m) into Orpea in return for a majority stake in the business.
As part of the business restructuring, lenders owed €4bn will have to swap their debts for a minority equity shareholding in return.
The move follows a failed plan to restructure Orpea’s debts last summer.
A scandal erupted after a book titled Les Fossoyeurs (“The Gravediggers”) was published in January 2022. It alleged widespread abuse in the nursing home sector, and singled out Orpea for particular criticism.
The book claimed staff were not adequately trained, as well as blocking patients’ access to adult nappies and food.
The French government ordered an investigation into the reported shortcomings, finding “serious dysfunctions” and “human and organisational shortcomings” in the sector.
In March 2022, French ministers announced legal action against Orpea, demanding for payments made to the company from the state to be repaid.
Orpea said in June that an independent audit had found evidence of financial wrongdoing, including inflated labour expenses and suspiciously large payments to third parties, although it did not back up the accusations made in the book.
The company rejected the allegations of widespread maltreatment.
Orpea operates more than 90,000 beds and has significant operations in Germany as well as smaller subsidiaries in Ireland and Spain.
Despite last year’s financial restructuring, Orpea has continued to access capital markets and is weighed down with about €9bn of debts.
A vote on the effective nationalisation of Orpea was scheduled for this Friday.
The dissenting hedge funds claim to have the support of around 49pc of unsecured creditors. Although this would appear to be a blocking stake – the restructuring requires support from two-thirds of creditors – there is greater support within some creditors classes.
As a result, a “cross class cram down” – which allows absenting creditor classes to drag along dissenting ones – could be used to force through the nationalisation.
The hedge funds say that they are willing to inject the €1bn that the business needs in return for taking control of the business.
The Orpea board has now agreed to delay the vote to nationalise the business until after June 23, when a legal appeal from the hedge funds is due to be heard.
A spokesman for the hedge funds said: “The flagrant disregard and refusal for months to engage on any alternative restructuring proposal, particularly one which is more favourable to all Orpea’s stakeholders, and the unwillingness of Orpea’s board to consider it, forces one to question France’s desire to be seen as a suitable and safe destination for foreign investment.
“The Orpea restructuring plan sets a terrible precedent for unsecured creditor treatment as the first major case under the new law. We do not want to see France go in the same direction as other nation states which have egregiously ignored creditor rights.”
Orpea was approached for comment.
