Numericable and Altice to market EUR10bn-equiv. bond from Monday

Fri Apr 11, 2014 12:18pm EDT

* Bond backing SFR buy to roadshow next week

* Details emerge on maturities and pricing

* Deal dubbed "High-yield's Verizon"

By Robert Smith

LONDON, April 11 (IFR) - Numericable and Altice will start marketing a huge 10bn-equivalent high-yield bond package backing the acquisition of SFR on Monday, according to a banker close to the deal.

On Saturday Numericable emerged victorious after a long bidding war with Bouygues for French telecom unit SFR, which Vivendi is disposing of. Numericable announced the 6.55bn loan component of the deal on Wednesday and has been meeting loan investors throughout this week.

On Monday it will begin meeting bond investors to market 6.04bn-equivalent of bonds at the Numericable operating company level and 4.15bn-equivalent of bonds at the Altice holding company level. The tranches will be split into euro and dollars.

JP Morgan is left-lead on the opco bond and Goldman Sachs left-lead on the holdco bond.

Maturities have not been formally announced and are subject to change, but most of the debt will be for eight-years. The opco bond should have five-year, eight-year and 10-year maturities, according to the banker, while the holdco issue should be solely eight-years.

HIGH-YIELD'S VERIZON

The deal's size is virtually unprecedented in the European high-yield market, and will rapidly eclipse Wind Telecom's 3.75bn-equivalent deal on Tuesday, the previous largest European high-yield bond of 2014.

Still, demand is expected to be fierce. "Loads of people are already putting in orders for the deal and it's not even been formally announced yet," said the banker.

"This could be the Verizon of the high-yield market."

Much like Verizon's US$49bn investment grade bond priced last year, market sources expect Numericable and Altice will have to pay up to clear such a large amount of paper.

"Most people are pegging it at a low 6% yield for the opco and low 8% yield for the holdco," said a high-yield investor.

"The opco could come inside 5% but I don't think it will. They need to pay us to clear so many billions of bonds in one go."

Pricing on the holdco bond is complicated by the fact that it not only sits above Numericable but also sits above Altice VII. Altice VII is the entity that has raised debt financing over the past year and contains its cable businesses in Israel, Portugal, and the French Overseas Territories among others.

The banker said that, as a result, there are a range of opinions on price and no one is sure quite where final pricing will end up.

"Wind's deal this week is probably the best comp, and no one expected that to come as tight as 7%," he added.

PIK TOGGLE OPTION?

The investor argued that as the Altice holdco sits above a lot of existing debt with the ability to trap cash, then it would have made more sense to issue a PIK toggle.

PIK toggles are a variation on payment-in-kind notes, which pay coupons in cash if the issuer can, while leaving it the option of allowing interest to accrue on the principal if it cannot.

"A PIK toggle would have given the company more flexibility, but it's not needed as they are very comfortable on being able to pay cash," said the banker.

"A 4bn PIK toggle would be a very difficult deal to sell to investors anyway."

German vehicle parts supplier Schaeffler issued the largest publicly placed PIK toggle last year, and at 1.5bn-equivalent this was not even half size of the Altice holdco bond.

The Altice Group is a multinational cable and telecommunications company with a presence in France, Israel, Belgium & Luxembourg, Portugal, French Overseas Territories and Switzerland. (Reporting by Robert Smith, additional reporting by Claire Ruckin.; Editing by Helene Durand and Sudip Roy)

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