UPDATE 1-RLPC-Arqiva shareholders inject $1.26 bln in refinancing

Fri Jan 4, 2013 10:11am EST

By Claire Ruckin and Tessa Walsh

LONDON Jan 4 (Reuters) - Shareholders in UK-based broadcast transmission provider Arqiva have agreed to inject 780 million pounds ($1.26 billion) of fresh equity to complete a key 3.7 billion pounds loan and bond refinancing, banking sources said on Friday.

Arqiva's seven shareholders were asked by banks for new equity to pay down existing debt. This will help the company to get an investment-grade BBB credit rating and allow it to issue bonds, the sources said.

The shareholders, which include Canada Pension Plan Investment Board with a 48 percent holding and Macquarie European Infrastructure Fund 2 which owns 25 percent, raised 380 million of the 780 million pounds equity injection by not taking dividends from Arqiva.

"Our shareholders have played a fundamental role in Arqiva's refinancing and have not taken any distributions since 2009. An equity contribution of 780 million pounds will support the company as part of the refinancing," Arqiva spokesman Gary Follows said.

HSBC and Rothschild are advising on the refinancing.

Arqiva, which says it provides the infrastructure behind television, radio, satellite and wireless communication in much of the UK and across large parts of Ireland, mainland Europe and the United States, was saddled with billions of pounds of debt at the height of a buyout boom which will start to mature in 2014.

The company was created in 2007, when a group of investors led by Macquarie merged National Grid Wireless with NTL Broadcast.

A large part of the equity injection will repay some expensive long-dated interest rate swaps, which were put in place in 2007 and are now 'out of the money', bankers said.

The swaps were designed to hedge against the risk of rising interest rates. But rates fell to historic lows and companies that took out the swaps have had to make costly interest payments that they no longer need.

PRECONDITIONS

The equity injection was necessary for the full debt refinancing to go ahead. It will help Arqiva to get an investment-grade rating, which it has already applied for, and issue 500 million pounds of investment-grade bonds.

The 500 million pounds investment-grade bond is necessary for the rest of the 3.7 billion pounds refinancing to go ahead, bankers said.

The loan element of the refinancing includes around 1.8 billion pounds of three and five-year senior term loans.

A 500 million pounds loan will cover capital expenditure and working capital requirements and a 200 million pounds debt service loan is also included, bankers said.

A 600 million pounds junior loan is also included which is a bridge loan to a high-yield bond, the bankers said.

Twenty banks have been mandated on the senior and junior debt and 12 banks have top tier relationship status.

"We are targeting a senior investment grade bond of 500 million pounds and a further holding company bond in the first quarter of 2013. The remaining 2.5 billion pounds debt is being raised via bank facilities from a club of banks," Follows said.

Arqiva has revenues of more than 800 million pounds per annum and employs more than 2,000 people, according to its website.

Its major customers include the BBC, ITV, Channel 4, Five, BSkyB, Discovery, CNN, ESPN, Vodafone, O2, Orange, T-Mobile, mobile provider 3 and the emergency services.