French audiovisual group Technicolor is finally on the verge of completing its prolonged financial restructuring after the company announced plans to redeem a portion of its existing debt with new shares as well as the sales of its Grass Valley Broadcast…
French audiovisual group Technicolor is finally on the verge of completing its prolonged financial restructuring after the company announced plans to redeem a portion of its existing debt with new shares as well as the sales of its Grass Valley Broadcast and Transmission businesses.
Technicolor is issuing more than 95 million new shares in order to redeem the majority of its convertible notes and disposal proceed notes. The issue will bring the total number of Technicolor shares to 174.847 million.
The French company, which prior to the restructuring was known as Thomson SA, is to redeem approximately 314 million notes redeemable in shares (NRS), just under half the outstanding convertible notes, through the issuance of 45.2 million new shares, based on a redemption rate of 0.144 new shares for each NRS. The remaining 325 million NRS will mature on 31 December 2011 at which point Technicolor will issue a further 51 million new shares.
Concurrently, Technicolor is issuing 50 million new shares at E4.255 per share to raise E212.75m in order to repay the majority of its E265.1m outstanding disposal proceed notes. The remainder will be redeemed in cash using the proceeds from the October 2010 sale of the majority of its 50% stake in cinema advertiser Screenvision US to Shamrock Capital Growth Fund II.
Technicolor secured the disposal proceeds notes over the past year and a half in order to fund ongoing operations. The debt was tied to the sale of a number of the company’s assets and was due to mature on 31 December 2010. However, this sales process took longer than expected and as such Technicolor has been forced to issue new shares to pay down the debt.
Alongside the sale of Screenvision US, the other assets on the block are the three Grass Valley businesses, Broadcast, Transmission and Head-End, as well as Premier Retail Networks (PRN) which provides digital out-of-home media networks and services.
On 3 January 2011, Technicolor announced that the sale of its Grass Valley Broadcast business to San Francisco-based private equity firm Francisco Partners for approximately US$100m has been completed. Under the terms of the transaction, Francisco Partners paid E20m in cash and a US$80m 6-year promissory note paying 5% per annum. Grass Valley Broadcast provides professional equipment and related services to satellite and cable TV broadcasters and teleproduction companies.
At the same time, the company has received a binding offer from German investment fund PARTER Capital Group for the Grass Valley Transmission business, which operates under the Thomson Broadcast brand and provides transmission products to terrestrial broadcasters. The offer values the Transmission business for a non-material amount and Technicolor expects to register a non-cash loss for this disposal in its 2010 financial statements, however the deal does enable Technicolor to get the loss-making unit off of its books.
The disposal process for the Head-End business and for PRN continues. Deutsche Bank has been advising Technicolor on the sale of the Grass Valley operations, while Goldman Sachs is advising it on PRN.
Background to the restructuring
Having spent much of 2008 and early 2009 struggling to manage its onerous E2.8bn debt burden, Technicolor proposed a debt-for-equity restructuring plan to its creditors in mid-2009. While a majority of the company’s lenders supported the strategy, Technicolor could not get the two thirds approval it required. The scenario was further complicated in October following an auction of credit default swaps on the company’s debt that made it increasingly difficult for Technicolor to track the owners of its debt.
This prompted the company to file for a ‘sauvegarde’ procedure, akin to bankruptcy protection, in the French commercial court of Nanterre in early December. The move was designed to force the lenders and bondholders to agree to a deal as otherwise the court would impose the plan upon them. The creditors subsequently approved the plan at the end of December and following a General Meeting on 27 January 2010, the company’s shareholder adopted the proposal.
Perella Weinberg Partners and Ph. Villin Conseil were mandated by Technicolor to advised it on the restructuring strategy as well as approach the creditors.
