Antalis is the largest European group in the distribution of communications support (see detailed explanation below). It has a geographical presence in 37 countries around the globe and is particularly strong in Western and Eastern Europe.

Olivier, can you begin by providing our readers with some background on Antalis?

Antalis is fully owned by Sequana Capital (formerly the Worms and Cie). Antalis was actually inaugurated in 2001, as a spinoff company from one of the group’s subsidiaries – Arjowiggins Appleton. From this subsidiary, two companies were created: Antalis, which took over the paper distribution business and Arjowiggins, which continued as the paper manufacturer.

So, Antalis is a paper distributor. However, it is more than that. Antalis is the largest European group in the distribution of communications support with a 16% market share in the region. In fact, Antalis is number one in France, Belgium, Poland and Switzerland, as well as being number two in Spain and Italy. Antalis also has strong presence in Asia, South Africa and South America (Chile and Brazil) and ranks number four worldwide.

We currently have around 180,000 customers in 37 countries and deliver 2,000,000 tons of paper each year. Our five main business areas are:

1. Print.

   A wide array of coated, carbonless and creative papers and envelopes for printers, graphic artists, designers, publishers and communication agencies.

2. Office.

   An extensive selection of paper and office consumables for resellers, businesses and public sector organisations.

3. Visual Communication.

   Paper, board and plastics for quality signage systems.

4. Packaging.

   Solutions for the conditioning and protection of industrial goods during transport and storage.

5. Promotional Products.

   Promotional items and company gifts personalised upon request.

In 2004, Antalis had a turnover of €2.4 billion. In the same year, our net profit was €8m (the first time it had been positive since 2000). Our mid year profits as of 30^th June 2005 were €16.1 (4.5 times the half year results of 2003), so we are doing quite well, especially considering current market conditions.

Since 2001, Antalis has demonstrated its ability to achieve a full turnaround; it has been partly due to an improvement in profit margins. Indeed, Antalis now makes a profit in every region where it operates and across every business line. We have also seen significant growth in the European packaging distribution. Furthermore, cash flow has improved thanks to tight control of working capital. We have also benefited from capital increases from our shareholder. We received €80m capital injections in 2003 and €180m in 2004.

Can you give me some details about how Antalis is structured financially?

Antalis had €325m net debt by the end of 2004, compared to €451m in 2003. Of course, this was largely due to the increase in capital from our shareholder. To put this in context, the nature of our borrowings has changed considerably in the last few years. In 2001, Antalis was mainly financed by debt from the shareholder as well as capital. In fact, 7% of our debt was external and the rest was from the shareholder. By 2002, a quarter of our debt was external and in 2003, 40% was external. Since the end of 2004, 100% of our debt has been external – through different financial vehicles/covenants with different maturities and pricing. The shift from internal to external is also due to several increases of capital as previously mentioned, as well as a general improvement in Antalis’ performance.

How is your treasury structured?

In terms of cash management, treasury has, historically, been very decentralised in Antalis. Even if group treasury uses an ERP (Enterprise Resource Planning) system to manage bank relationships, I, as the Group Treasurer, have had to help the entities manage their bank relationships. For example, an entity in Germany is not able to go and obtain financing from the bank. I have to talk to the bank, explain who I am, explain who the shareholder is and so on. So, now we have completed the refinancing project (which I will go into more detail about in a moment), our goal is to optimize treasury. Indeed, I am well-known in Antalis for the motto, “We need to centralise treasury in a large decentralised business!”.

Apart from the structure, I also need to formalise treasury responsibilities, particularly with regard to what the entities are responsible for. Indeed, Antalis has one Group Treasurer (me) and an Assistant Treasurer. There is also one person in nearly every entity, who is more or less dedicated to treasury – although this depends on the size of the business.

So, what are your main responsibilities?

My responsibilities, like many Group Treasurers, cover a large area. For example, I am responsible for all the standard treasury management and financing tasks you would expect – such as hedging, reporting to management and the shareholder, treasury and banking policy and funding. I also manage all the bank and shareholder relationships, as far as treasury is concerned. Furthermore, I am given special projects to manage as well – for example the refinancing project in 2005.

Can you tell me how the refinancing project was approached by your company?

My major task in the refinancing project was to make Antalis more independent from its shareholder by developing a bank network.

We started the project on 3^rd June 2005. We called the project ‘Annapurna’, as this is the name of the 8,000 metres high Himalayas mountain which the first Alpinist – who was French – climbed exactly 55 years ago on that day. It is a huge mountain and reflects the huge project we were embarking on, hence the name ‘Annapurna’. The project was huge for a few reasons. Firstly, we had to do it on a tight timescale and secondly, it involved a large sum of money. Moreover, the project had to be rolled out as smoothly as possible, which is not easy on a tight timescale.

We decided to embark on the project because we wanted to centralise treasury under one company – the holding company ‘Antalis International’. This raised the question of whether Antalis would be able to reshuffle its banking structure and refinance its debt on its own. The answer is Antalis now has its own equity structure due to increases in capital, allowing a stand-alone basis of financing, with homogenous governance and without needing the financial support of its shareholder. Of course, the shareholder is not reluctant to help, but we have all the resources to do it on our own now.

We worked very hard to turn this project around quickly. Our internal Legal Advisor and myself worked full-time for three or four months. We also had input from our subsidiaries from time to time and of course lawyers and other external advisors. However, the main work was carried out by two people.

The request came from our shareholder in mid May 2005. However, with a go-live date of 3^rd June 2005 for the financing, there was little time for planning! By the beginning of June, we had sent the proposal to the shareholder for approval; and by mid July, we had started the process off with the arrangers. We had a timesheet in place for the beginning of August and contracts for the loan agreements were finally signed on 21^st October 2005, with the first roll down taking place on 27^th October 2005. There were three stages of roll down – the first took place in October, followed by the second and third in November and December respectively. It is also worth noting that we had transferred to all the five participating banks by mid-November 2005.

The short timescale meant we negotiated with two MLAs (Mandated Lead Arrangers) – HSBC and CIC. We only looked at banks we were already in a relationship with as well. Previously, we had around seven banks and we are still with the same number and, in fact, the same ones. These are HSBC, CIC, BNP, Natexis, Fortis, ING and Société Générale. The two MLAs represent more than 40% of the financing. Another bank provided around 10% of the financing too, so half of our financing is with three banks.

Why did you not speak to other banks?

Antalis’ policy is to develop strong, long-term relationships with our existing partners. Our banks are very stable and have faith in Antalis and the refinancing project. These banks had worked with Antalis for two to three years and all parties involved wanted the relationship to continue. In fact, there was an over subscription of 10% by our own banks, so we did not need anyone else either.

What is the basis of your arrangement?

The financing is for €430m, with each bank providing between €30m to €90m. It is a secured, revolving credit facility over five years. The facility is secured by receivables from the French and UK entities. It has not been done on the sale of receivables, but by securing the financing with receivables. The portfolio in front of the financing is more or less 300,000 invoices.

What problems did you encounter with the project?

It was difficult to negotiate homogenous financing at a competitive price. The price is based on the level of securities we have and also on the improvement of key ratios.

Furthermore, it is important to take into consideration that we have no corporate rating. Therefore, the receivables that we use from the two entities (in the UK and France) to secure the facility, are being used to finance the whole group. You can imagine the complexity of this from a tax, legal and accounting point of view.

Why did you choose to use these receivables alone?

The receivables from the UK and France were selected as we already had channels set-up in these countries – with existing sale of receivable programmes. This meant the banks already had the infrastructure in place to use these receivables. Since we did not have time to set up a new programme, for example in Italy or Spain, we went with the quicker option. Also, we have sufficient level of receivables in the UK and France, to secure the financing.

Nonetheless, it was not an easy project. Apart from the fact it was my first major financing project, it was a lot of money to arrange in a short period of time. Added to that, the legal documentation was very complex, particularly with regard to the operational side of the deal. You see this type of financing is brand new. To include receivables with a financing arrangement is good, because it makes the cost of financing lower, as there is the back-up from the receivables. However, as it had not been done before by anyone, the drawing up of the legal documentation was complicated. Particularly because we were involving receivables from two different entities, which are in different countries with different laws. France and the UK have completely different legal systems, which had to be aligned in the documentation. Of course, with the help of both internal and external lawyers, we reached a solution and the banks approved the documentation. However, it was hard work getting there.

What benefits have you already seen from the refinancing?

We have certainly seen discipline and efficiency in all the entities who have joined. There is also now homogeneity in our pricing across the whole group. On the back of the project, we are building a new treasury architecture, with new rules. In the future, I also hope to further improve the quality of service given to entities.

My ultimate goal is to make the life of a treasurer simpler, so I can be more available for special projects and develop other skills to help Antalis become more successful.