Alok Malpani and Sons is a high-tech group in financial distress. Its key financials are as follows:

(€m) 2018 2019 2020 Sales 8,026 5,208 3,018 Operating income 130 (168) (100)

Financial expense (330) (144) (62)

Restructuring costs (1,020) (314) (0)

Net income (1,220) (626) (162)

Fixed assets 122 72 Working capital 614 330 Shareholders' equity (620) (784)

Subordinated debt 616 616 Senior debt 740 570 Alok Malpani and Sons shares are trading at €24. The company's share capital is divided into 8,910,000 shares. The value of the senior debt can be estimated at half of its face value and the value of the subordinated debt at 21% of its face value.

The following rescue plan has been submitted to all of the investors in the company:

Shareholder subscription to a capital increase of 15,500,000 new shares at a price of

€20 per share, totalling €310m.

Partial repayment and conversion of the subordinated debt into capital: issue of 3,850,000 new shares and repayment of €36.96m.

Waiver of €160m of debts by senior creditors. In exchange, 1,250,000 warrants entitling holders to subscribe after three years to 1 share per warrant at a price of €25 per share. The value of these warrants is estimated at €4 per warrant. The proceeds of the capital increase that are left over after partial repayment of the subordinated debt will be used to repay the senior creditors.

What is your view of the financial health of this company?

Calculate the value of the different securities used to finance the capital employed.

Calculate how much the various lenders will have before and after the rescue plan. Assume the negotiated amount of the face value of the senior debt will be 80% after the plan.

Who are the key beneficiaries of this plan?

AppendixLO1