COURBET

Courbet’s balance sheet structure remained unbalanced as at 30 June 2022, albeit simple following the disposal of its last asset in August 2021. Following the acquisition of the La Bourboule real estate complex in June 2022, the accounts closed on 30 June 2022 (fiscal year 2021-22) should show negative shareholders’ equity of €2m, an associate current account of the same amount in favour of the OTT group (AlphaValue assumption), an insignificant WCR (AlphaValue estimates) and then symmetrically fixed assets of €1.5m (La Bourboule) as well as a debt towards the OTT group of €1.5m. The balance sheet total would thus be €1.6m. Our estimates anticipate a conversion of the €2m shareholders’ current account at its nominal value in exchange for new Courbet shares before 30 June 2023.

Faced with negative equity of €2m at the end of June 2022 and in the absence of cash, Courbet will have a debt of €3.5m towards the OTT group, its 95% shareholder at the same date. We believe that these debts are a long-term resource. We anticipate their full conversion into equity (debt to equity) in order to facilitate the obtaining of bank financing.

Having contributed €1.5m in cash to finance the initial acquisition (prior to the sale to Courbet), the OTT group has provided sufficient cash to assume the backing of the La Bourboule renovation €6-7m in borrowings in several tranches, the first of which is €1-2m to deliver 40 rooms to be opened in the summer of 2023 (spring 2024 according to AlphaValue). In this first stage, the LTV (expressed in nominal terms) will be only 50-55%. The banks will probably finance the completion of the works in a second phase (tranches 2 and 3) if the success of tranche 1 is demonstrated. However, we do not exclude additional capital contributions in the future from the OTT group or any other partner to finance the acquisitions of projects 3 and beyond. In Cannes, the contribution is of the order of €3.6m against a second tranche of work of the order of €2.5m. The loan-to-cost ratio would thus be well below 50%. On the whole, the projected leverage seems quite reasonable.

Courbet has mentioned the possibility of a bond issue. Given its size, we exclude traditional drawings (green bonds, etc.) but will consider small-scale investments (€10-20m) in parallel with acquisitions. The cost of this solution has yet to be evaluated (liquidity/rate ratio by 2025).

Based on the NAV declared by Courbet in June 2022 (€1.20), the Company will issue approximately 6m new shares, i.e. a doubling of the number of shares existing at 30 June 2022, to remunerate the various contributions and conversions of receivables from the OTT group (Cannes, La Bourboule). The OTT group’s shareholding would automatically fall from 95% to 89% of the capital on 31 December 2022. Although it has not yet been announced, we are including these issues in the 06/2023 financial year given their probable nature.

Even if some opportunistic real estate development operations are an option, our assumption is that Courbet will keep the renovated assets on its balance sheet as part of a long-term asset management strategy. Without counting on the sale of any hotels, any rapid development of Courbet on other projects in 2023-26 will therefore require the raising of new equity capital, which we will scenario later. Beyond 2026-28 (maturity on La Bourboule and Cannes), Courbet will be able to deploy its capitalised free cash flow to self-finance a regular acquisition policy up to one unit per year by optimising its financial leverage. In the future, the Company will be able to use deferred dilution tools (quasi-equity, commitment to block a current account in the medium term, pledging of the said current account to the banks, CBs, etc.). Depending on the speed of deployment, the acquisition of 8-10 additional hotels (reaching the cluster effect of 10-12 units) is a credible hypothesis by 2030. Net of cash generation, an additional injection of hard capital in the order of €5-10m seems likely, i.e. half the market capitalisation in November 2022.

For the time being, we are not aware of any firm or quantified commitment from the majority shareholder to support the operation. Courbet has not yet received any firm loan commitments from banks to finance the works phase at La Bourboule or the renovation phase at Cannes.

At La Bourboule, the necessary administrative authorisations and the planning of the works for an opening in the summer of 2023 suggest that the bank financing will be authorised at the beginning of 2023, with amounts, duration and interest rates still to be determined. Our estimates suggest that €7m (excluding VAT credit) of works loans will be put in place in three tranches, to be disbursed progressively between 2022 and 2026-27.

In Cannes, we expect bank financing of €2.0-2.5m to be drawn down in 2023-24.

The OTT Group and Mr. Jean-François Ott personally are, in our opinion, together sufficiently solvent to accompany Courbet in the projects known to date and to ensure the liquidity of the Company.