Emmanuel Macron's government plans to invest more than 1 billion euros in struggling businesses in exchange for a controlling stake. Photo: LUDOVIC MARIN/AFP via Getty Images
Emmanuel Macron has been accused of pushing for a “covert nationalization” of a French private nursing home by a group of American hedge funds.
Orpea, a Paris-listed company, has been riddled with scandals, including allegations that older residents have been blocked from accessing adult diapers and food to be confiscated by the French state as part of plans to bail out the business.
< p>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, have said Orpea is being deliberately undervalued to force nationalization.“Europe is supposed to be open for business after Brexit, but this attempt at covert nationalization of a private and funded healthcare provider that was and still is a viable profitable business sends the opposite signal,” their spokesman said.
French state investment company Caisse des Dépôts et Consignations (CDC) plans to intervene by investing more than 1 billion euros (£860 million) in Orpea in exchange for a majority stake in the business.
As part of the business restructuring project, creditors owed 4 billion euros will have to exchange their debts for a minority stake in return.
The move follows Orpea's failed debt restructuring plan last summer.
Scandal . erupted after a book titled Les Fossoyeurs (The Gravediggers) was published in January 2022. The book claimed staff were not properly trained and also blocked patients' access to adult diapers and food.
The French government ordered an investigation into the alleged deficiencies, finding “serious dysfunctions” and “human and organizational shortcomings” in the sector.
In March 2022, French ministers announced a lawsuit. against Orpea, demanding the return of payments made to the company from the state.
Orpea said in June that an independent audit found evidence of financial irregularities, including inflated labor costs and suspiciously large payments to third parties, though this did not substantiate the allegations made in the book.
The company denied them. allegations of widespread abuse.
Orpea operates over 90,000 beds and has significant operations in Germany, as well as small subsidiaries in Ireland and Spain.
Despite last year's financial restructuring , Orpea still has access to the capital markets, and its debts are about 9 billion euros.
A vote on the actual nationalization of Orpea was scheduled for this Friday.
Dissenting hedge funds claim to be backed by about 49% of unsecured creditors. While this may seem like a blocking package (restructuring requires the support of two-thirds of the creditors), there is a lot of support in some classes of creditors.
As a result, “inter-class suppression” can be used to force nationalization, which allows absent classes of creditors to pull dissent.
The hedge funds say they are ready to inject the €1 billion the business needs in exchange for gaining control of the business.
Orpea's board has now agreed to delay the vote on the nationalization of the business until June 23, when the hedge funds will file a legal appeal . needs to be heard.
A hedge fund spokesperson said: “The blatant disregard and refusal for several months to participate in any alternative restructuring proposal, especially one that is more favorable to all Orpea stakeholders, and unwillingness Board of Directors of Orpea casts doubt on France's desire to appear as a suitable and safe place for foreign investment.
“Orpea's restructuring plan sets a terrible precedent for treating unsecured creditors as the first major case under the new law. We don't want France to go in the same direction as other nation-states that blatantly ignore the rights of creditors.”
Orpea reached out for comment.
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