solution for long-term change?

“As part of the takeover of the company that manages the aging fleet, I accompanied a potential buyer who, instead of removing obsolete cars from his project, offered to restore them all, recycle, thus facilitating the bankruptcy of these assets that are not can be monetized, and thus green his offer. The court welcomed this commitment and, of course, joined the case. In some cases, this type of commitment may even change between two equivalent proposals. “ explains Alexander Koenig, a lawyer responsible for the practice of restructuring and insolvency at Stephenson Harwood in Paris.

ESG criteria: a guarantee of good restructuring?

Communicating ESG performance gives the company a better chance of turning, according to an analysis by AMO Strategic Advisors, a strategic communications advisory group led by Havas Paris, entitled “Where Real Value Is: Communicating ESG Indicators to Support the Restructuring Process.” According to the study, ” ESG criteria and ratings allow honestly restore the real potential of the impaired asset. They are increasingly relevant for financial entities in determining the viability of a company undergoing restructuring. »

In the legal framework for business acquisitions headed by the Court, buyers must meet 3 criteria: maintaining employment, acquiring at the best price and providing performance guarantees. In a column published in Les Echos on May 31, lawyer Baptist de Fress de Montval of Oplus advocates the introduction of 4e criterion of compliance with the objectives of environmental planning. “Thus, courts can give preference to the buyer who carries out a project that meets the objectives of environmental planning”he wrote.

Another time interval in the context of a cash emergency

The crisis initially leads to a cash deadlock for a company that needs to re-infuse fresh money. At the same time, it must change its economic model to ensure its sustainability and / or return to profitability if it is in a loss-making situation. “During the restructuring, the integration of ESG criteria looks a bit avant-garde: in a situation where it is necessary to save companies’ cash flows and save jobs, communication about non-financial objectives of funds / long-term prospects is not a priority. However, in the long run, especially in sectors that are environmentally or humanly sensitive, we can expect that companies that are slow to develop and implement an effective ESG strategy will face other, or more than others, restructuring challenges. ” , Alexander Koenig emphasizes.

For example, the Marseille company Altéo Gardanne, accused of dumping red silt into the Mediterranean, noticed that the strengthening of environmental standards affected its activities, and in late 2019 it had to come under control. The crisis experienced by the Orpea-rated group, which received a very good ESG rating, nevertheless reveals the limits of the ESG rating, the reliability of which has been criticized, and has not prevented it from resorting to the € 3.2 billion refinancing prevention procedure. .

Communication on its ESG strategy should be based on two axes: financing and repositioning the company’s business model.

Easy access to debt

Increasingly, banks and investment funds are becoming acquainted with European standards that require compliance with ESG criteria. “We already see a taking into account the performance of the ESG companies by certain financial players dyears of valuation or credit rating of companies in search of funding. And this phenomenon should intensify with the development of regulations. A company with a favorable ESG rating could have easier access to debtexplains Alexander Koenig, but beware Obviously, the borrowing valve is not closed to companies – and there are many – that have not yet implemented the ESG policy.. All other things being equal, the cost of borrowing will be higher for a company that has not yet included the goals of ESG in its business plan, compared to a company that is more advanced in ESG.

With regard to capital investment, new shareholders and M&A, the integration of the ESG is reflected in the implementation of ESG reporting through the collection, formatting and transmission of data as part of due diligence. “Finally, companies that strive to gather and make available to their investors elements related to their risks and ESG action plans also need to increase their attractiveness compared to those that do not.” according to the lawyer.

ESG indicators say a lot about the future performance of an impaired asset, according to experts AMO Strategic Advisors. Proper communication can change everything in a complex restructuring process.

To do this, according to experts AMO Strategic Advisors, it is important ” identify what’s important for the business model “, because some indicators do not have the same effect for everyone. So ” the impact of fuel efficiency on airline profits ” differs from ” impact on the investment bank “. Instead of taking a general approachcompanies should, according to experts AMO Strategic Advisors, develop an individual ESG assessment system, which focuses on material and insignificant issues that directly affect them. This involves defining a set of specific quantitative and qualitative indicators with a clear technical protocol to define, scope, apply and present each non-financial accounting indicator. In this way, stakeholders receive a real guarantee of the reliability of the results.

Finally, and most importantly, companies, after determining the most relevant indicators, “ should focus on developing a compelling story ” about their ability to create value. This discourse makes it possible to involve the main stakeholders (banks, creditors, suppliers, restructuring) work together to improve key performance indicators and allow the impaired asset to generate long-term added value. It can even “It turned out to be crucial in terms of the viability of funding options “.

What are the communications?

The question is: what information am I passing on? In what form? “And if listed companies have to meet established standards, it is more difficult for SMEs and ETIs, where they are less structured and where standards do not yet exist.” emphasizes a lawyer working on cases where the ESG first appeared in the industrial sector, with polluting, capital-intensive and capital-intensive industries. “My experience first led me to understand the” E “(environment) of ESG, for example, on the occasion of closing the facility, managing its removal. “.

As part of the relocation, non-financial should become increasingly important in the assessment of companies in a situation of failure. Not to mention that this is a criterion for the attractiveness of the employer for young talent and competitive advantage.