UPDATE 1-Ziggo sets interest on euro 2024 exchange notes at 7.125%

Wed Feb 5, 2014 6:30am EST

* Interest set for bond exchange backing Liberty acquisition

* Market sources say offer looks generous

By Robert Smith

LONDON, Feb 5 (IFR) - Ziggo has set the interest at 7.125% on its euro 2024 exchange notes, which Liberty Global is offering to Ziggo bondholders as part of its acquisition debt of the Dutch cable firm.

The notes are the unsecured financing of the acquisition and take the form of an exchange offer to holders of Ziggo's EUR1.2bn 8% 2018 senior notes, rather than a new issue. The investors have been offered the chance to exchange into EUR934m of new 8% senior notes also due in 2018.

If they agree, bondholders will receive a guaranteed allocation on a new 10-year non-call five high-yield bond with a May 2024 maturity. This 10NC5 deal will only come into existence if and when Liberty's acquisition of Ziggo is closed.

Market sources say that the interest on offer looks generous.

Leads said last week that the rate would be at least 6%, according to a Ziggo bondholder. The bondholder said at the time that 6.5% looked like fair value and 6.75% would be more attractive.

"At 7.125% this is very good value, even with the recent sell-off in high-yield," the bondholder said this morning.

"I think Liberty needs to pay guys to get off the fence, especially accounts that are indifferent to the 2024s, like short duration guys."

The existing Ziggo 2018 notes are callable in May this year at 104, so are likely to be held by a lot of short-duration funds anticipating this call.

"Generally with Liberty deals you get the most value from the event-driven trades rather than their refinancings," said a high-yield syndicate banker.

EARLY BIRD PREMIUM

The new 2024 notes will be callable at 103.563% from May 15 2019, 102.375% from May 15 2020, 101.188% from May 2021, and at par from May 15 2022.

The bond will also have a 40% equity claw at 107.125% before May 15 2017.

The early bird deadline is February 7 at 1700 EST. Bondholders agreeing to the exchange before then will receive an early participation cash payment of EUR40 for every EUR1,000 held.

Credit Suisse is the dealer manager and structuring adviser on the exchange.

The exchange's EUR934m target amount will take Ziggo's total leverage to 5x, while the new EUR3.735bn-equivalent term loan B will put senior secured leverage at 4x.

Ziggo also set final terms on the loan this morning. A EUR2bn tranche will carry interest of 300bp over Euribor, while a USD2.35bn tranche will pay 275bp over Libor. Both have 0.75% floors and an original issue discount of 99.75%.

The ticking fee will be zero for the first 30 days, then climb to 50% of the margin from the 31st to the 105th day, before becoming 100% of the margin on day 106.

Unconditional commitments are due on February 6 by 1700 GMT and 1700 EST.

Global coordinators are Bank of America Merrill Lynch and Credit Suisse.