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UPDATE 1-Numericable presses ahead with high-yield bond
* Numericable focuses on refinancing despite merger talk
* Company's cost of funding shrinks after bond rally (Adds detail, background)
By Natalie Harrison
LONDON, Oct 16 (IFR) - French cable company Numericable is going ahead with a long-awaited high-yield bond which would capitalise on cheaper borrowing costs resulting from a rally in its existing bond after takeover talk emerged.
Media reports over the weekend that the company is in talks over a possible tie-up with Vivendi's French mobile phone operator SFR initially cast doubt on whether the bond deal would proceed.
That uncertainty was mostly driven by the huge gap in each entity's cost of funding, with Vivendi enjoying investment-grade status while Numericable is firmly in junk territory.
However, Numericable took the plunge on Tuesday, announcing a dual-tranche EUR410m bond after months of speculation that a transaction was imminent.
The company has around EUR2.6bn of leveraged loans maturing over the next five years. As a result, Numericable is focused on its bond plans, which will improve its debt maturity profile, even though a merger with SFR would transform its credit profile.
Arguably, Numericable's private equity owners - Cinven, Carlyle Group and Altice - who have owned the business since 2006, are in the best position for several months to access debt capital markets.
Not only has the company's cost of funding shrunk, but investors will now be debating the prospect of buying a Single B credit with a yield of 9-10% that has the potential to be hauled up to investment-grade if the merger were to happen.
Numericable's only existing high-yield bond - a EUR360m debut deal that printed in February to yield 13% - jumped four points on Monday on the tie-up talk and is now yielding 9.5%.
Vivendi's bonds, in comparison, mostly yield below 3%.
The strong performance of the bond also means that the issuer should shore up enough demand in the euro market, allowing it to avoid the necessary punitive swap costs that would have been added by accessing the dollar market instead.
Numericable's latest bond will have a six-year maturity, is split between a senior secured fixed rate bond and a floating rate note, and will refinance some of the its shorter-dated loans.
It follows an approval by lenders to alter the prepayment of its debt from bond proceeds to loans maturing over the next three years rather than in 2016 and 2017.
The bond could price as soon as Thursday following investor meetings in Paris on Tuesday and London on Wednesday.
The fixed-rate note will have a maturity of 6.25 years and will be callable after 3.25 years, while the FRN will have a six-year maturity and will be callable after one year.
JP Morgan is left lead, while BNP Paribas, Citi, Credit Agricole, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC and Morgan Stanley are bookrunners. (Reporting by Natalie Harrison; Editing by Alex Chambers and Julian Baker)
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