Atos Crisis Close to Resolution as Creditors Agree on €2.9B Debt Swap

Atos SE Creditors to Take Control Amid Financial Turbulence

In a dramatic turn of events for the embattled French IT services provider, Atos SE, creditors have agreed to seize control after a lengthy struggle to decide the company's future. This development follows severe financial troubles, including spiraling debt, accounting errors, profit warnings, and industry challenges that have dramatically slashed nearly €12 billion from its market value over the last seven years.

Debt Conversion and New Financial Support

The creditors have consented to convert €2.9 billion ($3.1 billion) of loans and bonds into equity. They will also provide up to €1.68 billion in new debt and inject €233 million in new equity. This financial maneuvering either involves the creditors themselves or possibly a private industrial investor.

Although Atos has expressed a preference for an anchor investor to assist with the equity injection, company representatives have chosen not to offer public comments. This agreement is seen as a critical step in salvaging the IT giant, which is integral to both the French nuclear sector and the Olympic Games infrastructure.

Restructuring and Shareholder Impact

The deal changes the dynamics favorably for debt holders by eliminating uncertainty that had surfaced after David Layani’s Onepoint, the company's largest investor, retracted from an earlier agreement. Although the restructuring heavily dilutes existing shareholders' equity, with their stakes now worth nearly nothing, it paves the way for Atos to stabilize its debt levels and rebuild its business.

Atos's bonds due in 2025 made a modest recovery in early trading following the announcement but continue to trade in distressed territory.

Court Intervention and Government Interest

Once sufficient creditor support is secured, Atos plans to request an accelerated safeguard from a commercial court. This process may allow Atos to bypass opposition from dissenting stakeholders. Additionally, creditors have agreed to reevaluate a proposed sale of part of Atos’s big data and security unit (BDS) to the French government. The non-binding government offer, totaling €700 million including debt, aims to acquire strategic assets such as supercomputers and cybersecurity operations.

If the reassessment reveals that the proposed purchase price is not fair or in the company's best interest, Atos may cancel the transaction. The government had previously estimated the value of these assets to be as high as €1 billion.

Negotiation Journey and Competing Proposals

Negotiations under a court-appointed mediator began in early February, aiming to address Atos’s daunting €4.85 billion debt. From the outset, two different rescue proposals emerged: One from Onepoint, advocating for a holistic "One Atos" approach to avoid a company breakup and remain under French ownership, and another from Daniel Kretinsky’s EPEI, favoring substantial debt reduction and the disposal of Atos's digital business.

While Layani’s Onepoint proposal initially prevailed, he withdrew last week after further scrutiny of the company’s situation. Left with limited options, creditors had to choose between reopening talks with Kretinsky or proceeding independently. They opted for the latter, leading to the current agreement for restructuring.

This comprehensive restructuring deal marks a turning point for Atos, potentially allowing it to overcome its financial distress and begin a path to recovery.