CDS: Ziggo bonds slip as LGI share-buy triggers takeover talk

Thu Mar 28, 2013 8:20am EDT

LONDON, March 28 (IFR) - Ziggo's outstanding bonds fell on Thursday, weighed by news that cable operator Liberty Global was buying a 12.65% stake, prompting speculation it might eventually make a full bid, increasing Ziggo's leverage.

Ziggo, the Netherlands' largest cable operator was last in the bond market earlier this month with its debut investment grade secured bond, which is rated Baa3/BBB-.

Those 3.625% March 2020 notes dropped one point to a cash price of around 100.40, according to Tradeweb, while Ziggo's high-yield 8% May 2018 issue was also a point lower at 107.50.

Liberty Global, which owns multiple cable companies including UPC and Telenet, said on Thursday it had bought the shares in Ziggo for EUR25 apiece from Barclays Capital Securities, prompting rumour Liberty might bid for the whole company.

Liberty said in a statement that the acquisition, in a sector in which it is already involved, was attractive given the stock's dividend yield of about 7.4%, based on the expectation that Ziggo would pay EUR370m to investors in 2013.

The share purchase follows a EUR1bn 20% stake sale of the company by private equity firms Cinven and Warburg Pincus earlier this week.

That sale left underwriter Barclays holding more than EUR700m in Ziggo shares, and caused many observers to label it a failure.

Liberty is already involved in a multi-billion pound acquisition of British cable group Virgin Media - one of the biggest M&A transactions in Europe since the 2007 financial crisis.

On the news of that takeover, Virgin Media's investment grade 2021 bonds - which had been trading at a cash price of 113 before the acquisition was leaked to the media - dropped to about 105, on fears that Liberty Global would sharply increase leverage at Virgin Media.

When the deal was confirmed a day later, the bonds dropped further to 101, even though senior secured leverage was raised only modestly to 3.4 times from 3.1 times on a secured basis.

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