Reference shareholder transferred its risk in FY 19
Reference shareholder transferred its risk in FY 19SIGNIFICANT NEWS
FY 19 consolidated accounts demonstrated an increasing risk level. On the other hand, FY 19 annual report didn’t mentioned the FPN’s warrants supposedly neutralised in H1 20.
FACT
FY 19 consolidated accounts don’t show material deviation vs. our initial assumptions.
FIPP (reference shareholder, groupe Duménil) owned a €12.6m shareholder loan in FPN by the end of FY 18. The latter has been converted in October 2019 in a debt now owned on Pamier SARL, the FPN’s subsidiary owning the group’s plot in Le Blanc-Mesnil. This move grants FIPP with real guarantees (mortgages) to the detriment of other FPN’s shareholders.
Litigations. The French fiscal administration didn’t accept an haircut on its c. €10m tax receivables. As a consequence, FPN started a trial in French courts in order to contest those amounts formally.
ANALYSIS
Fiscal claims
One could have hoped that the French fiscal administration would have accepted a deal regarding the accrued amount of c. €10m of unpaid historical property taxes.
A long legal procedure started early 2020. In the absence of revenue (occupancy being nul), risk level rises as the annual amount of property taxes was €1.2m in FY 19 vs. the current €3m of FPN’s market cap. Property taxes could progressively consume FPN’s plot residual value, should both trial and disposal take time.
We still consider FPN’s victory as a pure free option.
FIPP’s investment structure
FIPP, FPN’s reference shareholder (groupe Duménil) converted its €13m shareholder’s loan in Pamier SARL shares in October 2019. We remind that Pamier SARL is the 100% subsidiary of FPN, owning the Le Blanc-Mesnil plot. FIPP loans are therefore closer to the asset itself.
This move enabled FIPP to secure its loan through mortgages leaning on the asset itself (plot) and 100% of Pamier SARL shares. From an initial naked loan, FIPP loan is now secured, depriving other FPN’s shareholders from the remaining portion of unencumbered asset.
The natural consequence of it is that, coupled to fiscal claims, other shareholders’ risk increased significantly in FY 19.
IMPACT
Our estimates were unchanged. Balance sheet stays unbalanced and shareholder’s equity stays strongly negative. Changes in FIPP shareholder loan’s structure improved lenders’ priority order but deteriorated shareholder’s value.
FY 19 annual report didn’t mentioned a warrants’ neutralisation in H1 20. Warrants are key in the FPN’s valuation process.
Governance was unchanged, groupe Duménil still controls 100% of the Board.
Fonciere Paris Nord SA. Fonciere Paris Nord SA, formerly ADT SIIC SA, is a France-based investment company primarily engaged in the activities related to the acquisition and management of real estate. It has a portfolio of assets comprising various types of buildings, such as offices, commercial and residential buildings. The Company's real estate assets are located in Paris and the Paris suburbs, among others. As of December 31, 2011, the Company operated through subsidiaries, including Compagnie Financiere Fonciere et Immobiliere-CFFI, Maintreuil and Pamier. In June 2013, it sold its stake in Venus to FIPP.
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