Atos staves off bankruptcy, casts wider net for refinancing

Atos may have won a few extra months to find a long-term solution to its financial problems after reaching interim agreements with banks, bondholders, and the French government to provide €450 million (US$490 million) in additional liquidity.

But the company is out of ideas for finding new money after the collapse of plans to sell its legacy infrastructure management business to an investment fund and its big data business to Airbus.

On Tuesday, Atos laid out its financing needs — €1.2 billion in new money, including up to €600 million in equity — and invited existing stakeholders and potential new investors to make it an offer. It set an initial deadline of April 26 for submissions, and said it hoped to reach an agreement by June 15.

Atos said it wants to ensure the business continuity and long-term sustainability of the group; to reassure clients, employees, and suppliers of its creditworthiness; and to preserve the strategic interests of the French state.

The trouble with Atos

The challenge for Atos is that, despite a succession of new CEOs, new board members, and new strategies, it still keeps losing money — and it is already heavily loaded with debt, making banks reluctant to extend more credit to help it through the continuing bad times.

In search of a quick fix for the debt problem, the company has spent much of the past two years preparing to spin off its legacy infrastructure management activities as a separate business, Tech Foundations, much as IBM spun out Kyndryl. But negotiations to sell that business to investment fund EP Equity Investment collapsed in February 2024.

Another project to raise €1.8 billion from the sale of its big data and security activities to aircraft manufacturer Airbus fell through in March.

Neither of those sales would have fixed the underlying profitability problem. Indeed, the Airbus deal could even have aggravated it by parting with some of Atos’ most lucrative activities.

Interim solution

As an interim measure, Atos bondholders have agreed to provide a €100 million revolving credit facility, while its banks have offered to provide up to €300 million through a factoring facility — providing an advance on accounts receivable. That, Atos said, should be enough to keep it afloat until it has a longer-term plan in place.

The French government has also offered a $50 million short-term loan to Atos subsidiary Bull, conditional on it continuing to deliver on certain contracts important to French national security. That offer, though, comes with other strings attached, including being first in line for repayment, and getting a veto on any transfer of ownership of the national security activities in the event a refinancing plan is agreed. Other customers will have to take their chances.

Long-term prospects

In the longer term, it’s still unclear whether Atos can turn things around. It recently reported its full-year results for 2023, after delaying twice to give auditors time to examine an independent business review report and to complete their audit of non-cash goodwill impairment charges.

In 2023, the company made a net loss of €3.4 billion on revenue of €10.7 billion, compared to a net loss of €1 billion on revenue of €11.3 billion in 2022.

It attributed much of that loss to non-recurring items, including impairment of goodwill, and said that excluding such exceptional items, it made a net profit of €73 million in 2023, compared to a net loss excluding exceptional items of €28 million a year earlier.

Whether this marks the end of the exceptional losses remains to be seen, but on Tuesday Atos published a forecast shared with investors and would-be investors showing that it expects to remain cash-flow negative (after interest and taxes) for the next two years, with net debt continuing to balloon. It also forecast at least one more year of declining revenue, before a return to slow growth in 2025 and a slight acceleration, to 6.2%, in 2026.

In the wake of the two aborted divestments, Atos has pieced together a new joint go-to-market plan for Tech Foundations and for Eviden, its umbrella brand for the activities it always planned to retain.

If it secures new financing, then it plans to invest in R&D and growth in Eviden’s digital services, cloud, digital security, and advanced computing activities. But it also intends to invest in the shrinking Tech Foundations side of the business — or at least in its more profitable activities, such as AI-based contract management, data-driven autonomous operations, and AI-based analysis of managed third-party spend.

David Layani, CEO of French IT services company Onepoint, which is Atos’ largest shareholder, wants to keep the company together. The separation was costly, caused chaos within the business, and removed any synergies, he told journalists at a recent event, news website Le Monde Informatique reports.

He is in the process of putting together a consortium to refinance the company under the banner OneAtos, with the goal of restructuring the company’s debts while retaining all its assets. He’s already won the support of French investment firm Butler Industries.