LONDON, UK / ACCESSWIRE / July 10, 2020 / Technicolor (TCH) has negotiated a refinancing with its lenders, to be put to shareholders at an EGM on 20 July. This involves an initial injection of €420m of additional debt, in part to repay a bridge loan expiring at the end of July, to be followed by a €660m debt-to-equity swap. Shareholders will have the chance to participate in this element through a rights issue priced at €2.98. Management has outlined trading scenarios for a base case and a high case through to FY22e, both of which reflect the COVID-19 impact. We have adopted the base case guidance as our model. It has had a particularly harsh impact on the Production Services activities.
Given the current liquidity situation, traditional valuation metrics such peer comparison and DCF are of little use. If the proposed refinancing goes to plan, it should result in a much stronger balance sheet and improved visibility. However, it comes at a price to existing shareholders leading to a significant equity dilution.
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