UPDATE 1-Liberty goes all-loan route for Ziggo acquisition debt

Mon Jan 27, 2014 5:28am EST

By Robert Smith

LONDON, Jan 27 (IFR) - Ziggo launched the debt financing for its long-anticipated acquisition by Liberty Global (LGI) on Monday, opting for an all-loan debt package against the backdrop of a softening bond market.

Ziggo has mandated banks for a new EUR3.735bn-equivalent term loan B, according to a banker on the deal. The loan will be split into euro and dollar tranches, both maturing in January 2022, with 0.75% Euribor and Libor floors.

The proceeds will be used to refinance existing Ziggo debt as well as financing the acquisition of Ziggo by LGI.

LGI is a frequent issuer in both the high-yield bond and leveraged loan markets, but has opted for an all-loan deal in this instance, in contrast to its approach on previous acquisitions. When LGI acquired German cable firm Kabel BW in March 2011, for example, it financed the acquisition with a EUR2.25bn high-yield bond.

The fact the European high-yield bond market has softened in recent days could have influenced LGI's decision. The iTraxx Crossover, a synthetic index often used to gauge market sentiment, was bid as tight as 280bp on Wednesday, but has widened out to 312bp on Monday morning.

"In the current market this capital structure is one that works for Liberty," said a banker on the deal.

Ziggo has EUR3.114bn of total debt, according to its latest financial results presentation. Some EUR1.905bn is senior secured, split into a EUR405m senior credit facility, a EUR750m 6.125% 2017 bond, and a EUR750m 3.625% 2020 bond. The remaining EUR1.209bn is accounted for by an 8% senior unsecured 2018 bond.

Ziggo has launched a tender offer to purchase any and all of the outstanding 3.625% 2020 notes, and has also announced its intention to redeem any and all of the 6.125% 2017 notes.

Ziggo has also announced an exchange offer on the 8% 2018 notes, under which up to EUR934m will be swapped for an equal amount of new 8% 2018 paper.

The new Ziggo acquisition debt will "more or less" take out all of its outstanding debt "over a staged period of time", according to a source close to the deal, however.

The new loans will not be fully covenant-lite, but will have just two maintenance covenants covering net senior leverage and total financial leverage.

The loans are expected to be rated Ba3/BB-. Ziggo's expected corporate rating is B1/BB-.

Global coordinators are Credit Suisse and Bank of America Merrill Lynch. Joint bookrunners and mandated lead arrangers are Credit Suisse, Bank of America Merrill Lynch, ABN Amro, Credit Agricole, Deutsche Bank, HSBC, ING, JP Morgan, Morgan Stanley Nomura, Rabobank, Scotiabank and Societe Generale.

Bank meetings in London and New York will be held on Tuesday, with a February 4 commitment deadline.

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