(Bloomberg) -- Once a darling of French business and a wannabe competitor to Accenture and Capgemini, IT giant Atos SE is struggling as its shares tumble, a debt wall looms, and a break-up beckons. Its unraveling looks set to provide the next big test for France’s restructuring regime, following the downfall of care-home operator Orpea and food retailer Casino Guichard-Perrachon. 

Here is what happened to the company, a key supplier to the French nuclear industry and the Olympic Games.

What is Atos and why is it important?

Formed in 1997 from the merger of several IT providers, Atos has undergone numerous transformations. In 2009, current European commissioner Thierry Breton took the helm and, over the course of a decade, molded it into an IT giant through various high-profile acquisitions.

Atos bought Siemens IT Solution and Services in 2011, French supercomputing champion Bull in 2014, as well as Xerox ITO for $1 billion the same year, and US player Syntel in 2018 for $3.4 billion. Atos’ market capitalization surged and the company entered France’s blue-chip CAC 40 index in 2017. By 2022, the firm had revenue of €11.3 billion ($12.1 billion), and now employs 105,000 people worldwide. 

Over the course of its evolution, Atos has absorbed many lines of business, from legacy IT infrastructure outsourcing to consultancy, cybersecurity, defense, cloud computing and decarbonization. The firm is an IT provider for the French army, and the supercomputing technology inherited from Bull means it is also key for France’s nuclear industry. All the most sensitive activities are grouped under BDS, its big data and cybersecurity unit. The group is also the International Olympic Committee’s long-term IT partner, with the next Games due to be held in Paris this summer. 

How did it get into trouble?

Atos’ series of governance and miscommunication setbacks started in 2021, when reports emerged about its plans to acquire US competitor DXC Technology Co. for $10 billion. The news hit its share price as investors questioned the deal, which was abandoned the next month. Later that year, Atos lost more than €1 billion in market value after it disclosed that auditors had found accounting errors at two of its US entities.

Reported disagreements over strategy and a series of profit warnings were compounded by high management turnover, with five different chief executive officers over the past two and a half years. Atos’ market value has fallen from €8.2 billion at the end of 2020 to just above €300 million at the beginning of February 2024. 

The company has been slow to adapt its core business to the shift of the IT industry from managing traditional on-site data centers to external cloud computing services pioneered by giants like Amazon Web Services and Microsoft’s Azure. It has struggled to find a way to catch up and reignite growth with fast-growing digital areas, leading to the 2022 plan to split the company, with its legacy IT business on one side and a cloud and cybersecurity unit on the other.

What assets are for sale?

Atos announced on Aug. 1 that it was in exclusive talks with Daniel Kretinsky’s EPEI for the sale of its legacy IT services division Tech Foundations. Under the terms of the deal, Atos would get €100 million in cash and transfer €1.9 billion in debt to EPEI. As part of that agreement, Kretinsky would also participate in a capital increase for Eviden, Atos’ remaining cloud, supercomputer and cybersecurity business.

Following backlash from some French lawmakers and further changes in management, the company and EPEI have been renegotiating the terms of the deal, and the capital increase was pulled by the company on Monday. The exclusivity period ends in July. 

Meanwhile, a minority shareholder sued management in France for lack of transparency around the sale. Other minority shareholders also filed lawsuits against the company, accusing former Atos chair Bertrand Meunier of misleading and inadequate disclosures. 

On Jan. 3, the company announced it was reviving talks with Airbus for the sale of BDS, its most strategic unit, for up to €1.8 billion. In the same announcement, Atos said it’s considering other ways to raise cash including further asset sales that would far exceed an earlier target of €400 million.

How will it tackle its looming debt wall?

The company has €2.4 billion of bank debt due next year. On Monday, Atos said it has requested a court-appointed mediator, known as a “mandataire ad hoc” to help with the refinancing negotiations. 

The discussions under the “mandat ad hoc” are confidential, don’t have a time limit and often represent the last step before conciliation, a type of restructuring process under French law. Conciliation is confidential and can last up to five months, and it’s a necessary step for a debtor before entering into an accelerated safeguard procedure. Under the safeguard option dissenting creditors may be crammed down if necessary. 

Read more: Secretive French Restructuring Tool Is on Rise as Firms Struggle

Atos also has to address the maturity of €500 million of convertible bonds due in November, and €750 million of notes due in May next year. It also has about €1.2 billion of bonds maturing between 2028 and 2029. Both the bank debt and the bonds are unsecured. 

One option under consideration by the company to address the near-term maturities is to carry out a liability management exercise that would reinstate the revolving credit facility, exchange the loans and the 2024 and 2025 bonds for other instruments maturing in 2028 with more seniority but an implicit write-off. That option would also include a rights issue of about €300 million and some cash payment from the disposal of BDS when and if it happens.   

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