Here’s how French Alstom will try not to derail
Alstom has launched a one billion euro capital increase to reduce debt. Facts, numbers and insights
To get back on track, Alstom launches a one billion euro capital increase.
At the end of last year the French industrial group specializing in the construction of trains ( Italo , for example, uses high-speed AGV models) and railway infrastructure had lost half its market value after cutting its free cash flow forecasts for the whole year in October. Already last November the company declared that it would consider a capital increase, now detailed.
In the wake of the plan announced last May 8, Alstom announced yesterday that it aims to raise 999.2 million euros in gross proceeds from the capital increase, with the maintenance of the preferential subscription right (DPS). The subscription period begins May 30th and ends June 10th.
The main shareholders of the railway group, the Canadian pension manager Caisse de dépôt et placement du Québec and the French state investment company Bpifrance, which together hold almost 25% of the capital, have already confirmed their pro-quota participation in the increase of capital.
“Barring surprises, the speculative derailment can be avoided,” commentsLes Echos .
In addition to the capital increase, the plan to strengthen the balance sheet also includes disinvestments and hybrid bonds to achieve the objective of reducing net debt by 2 billion euros by March 2025.
All the details on the progress of the manufacturer of the iconic French TGV trains.
THE CHARACTERISTICS OF THE OPERATION
The one billion euro capital increase for Alstom is therefore underway. The Dps will be negotiable from 28 May to 6 June 2024. Their theoretical value is indicated at 0.87 euros. Each shareholder will be offered the opportunity to subscribe to one new share for every five shares already owned, at a price of 13 euros for each new share. The price is significantly lower than the closing price on May 23, equal to 18.22 euros, but operators believe that the size of the discount is within the norm for operations of this type.
THE COMMITMENT OF CDPQ AND BPIFRANCE MEMBERS
The Caisse de depot et placement du Quabec (Cdpq) and Bpifrance Investissement, Alstom's main shareholders with 17.4% and 7.5% respectively, have pledged 173.5 million and 75 million euros. Alstom said it was "not aware of the subscription intentions of the other shareholders". Any shareholder who does not sign the transaction would be diluted by approximately 17%.
THE DEBT REDUCTION PLAN
As already mentioned, in addition to the recapitalization, the plan also includes 700 million euros of disinvestments, already carried out or in the process of being implemented and the placement of 750 million euros of hybrid bonds, "successfully placed on 23 May 2024", reports the society.
Proceeds from the raise will be used for debt repayment in September, while the remaining funds will be dedicated to “highly liquid” short-term investments and other debt relief initiatives.
THE SALE OF THE NORTH AMERICAN RAILWAY SIGNALING BUSINESS
As part of its plan to reduce net debt by 2 billion euros by March 2025, Alstom then sold around 700 million euros of assets, including its US signaling business for around 630 million euros to the German rail system manufacturer Knorr-Bremse. The divested business represented a turnover of around 300 million euros for the full year 2023/24, the group had said in a statement, adding that it will continue to serve the North American signaling market in other segments.
ALSTOM NUMBERS
The Paris-based transport giant, which supplies most of France's trains and subways, has around 80,000 employees and is present in 63 countries.
Alstom has encountered difficulties in recent months, due to high debt – the group's net debt stood at €2.99 billion as at 31 March 2024 compared to €2.1 billion in the 2022-2023 financial year – and significant cash losses.
In the financial year ended at the end of March, Alstom recorded net losses of 309 million (132 million the red for 2022-23) on revenues increased to 17.6 billion euros (from 16.5 billion) and does not expect to pay a dividend for the period. Additionally, Alstom reported negative free cash flow of €557 million for the year compared to positive €199 million a year earlier. The French manufacturer is ready to work on new efficiency measures, including cuts to indirect procurement costs, Chief Executive Henri Poupart-Lafarge said in a statement.
DIFFICULTIES
Alstom is the world's second largest train manufacturer after China's state-owned CRRC and has contracts on its orders from Britain for its HS2 high-speed railway and the largest rail tender in the history of Danish Railways, highlights Reuters .
However, the company is in trouble following last October's slashed cash flow outlook due to delays at a project in the UK, called Aventra, a contract inherited from Bombardier's $5.5 billion acquisition plus three years ago, Bloomberg recalled at the beginning of the month. It comprises 443 trains serving, among others, the London Overground and the Elizabeth Line. The profit warning wiped up to €3.1 billion off the company's share price in a single day.
ALSTOM'S ACTIVITIES IN ITALY
As Startmag recalled last October, “Alstom's performance is of interest for Italy because the company has a significant production presence in our country, with nine factories – in Savigliano, Vado Ligure and Sesto San Giovanni, for example – and over 3500 employees. In addition to Italo, Alstom has important relationships with Trenord, the Trenitalia and FNM Group company that deals with rail transport in Lombardy, to which it will supply fourteen new hydrogen trains .”
THE COMPANY'S POSITION
Finally, with the announcement of the start of the capital increase, "Alstom today completes a decisive step in the implementation of its debt reduction plan", underlines a company press release.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/ecco-come-la-francese-alstom-cerchera-di-non-deragliare/ on Tue, 28 May 2024 10:16:41 +0000.