RLPC-Prisa's asset disposals spark debt reshuffle

LONDON Fri May 9, 2014 8:12am EDT

LONDON May 9 (Reuters) - Spanish media giant Prisa is using the proceeds of recent disposals to reshuffle its 3 billion euro ($4.16 billion) debt by launching a discounted debt buyback and converting some debt into an equity-like instrument, bankers said on Friday.

Prisa has been selling assets this year in a drive to reduce its debt after completing a formal restructuring of its 3 billion euro debt with creditors in December.

Prisa sold a 3.69 percent stake in Mediaset Spain, the local unit of Italy's Mediaset in April for 120 million euros. The proceeds of this sale will be used to buy back debt, several bankers said.

The company's board also accepted an offer from Telefonica to buy a 56 percent stake in pay-TV firm Distribuidora de Television Digital (DTS) for 725 million euros.

DTS is valued at 1.5 billion euros on Prisa's books. The loss-making sale will wipe out Prisa's current 200 million euro equity value and take the company into negative equity, the bankers said.

The debt reshuffle will convert some of Prisa's existing debt into a Profit Participating Loan (PPL) which will cover the equity losses and give Prisa around 100 million of equity value, they added.

A PPL is subordinated junior debt which can boost the value of a company by effectively restocking its equity by acting as an equity-like instrument.

Prisa was not immediately available to comment.

CAPITAL STRUCTURE

Prisa's formal debt restructuring in December created three tranches of debt. A new 353 million euro 'super senior' tranche 1 loan was provided by hedge funds and existing debt was split between a 647 million euro tranche 2 and a 2.3 billion euros tranche 3.

Prisa will use the proceeds of the Mediaset sale to buy back tranche 2 and 3 debt in a two-stage auction, the bankers said.

The company is aiming to buy back the debt at a deep discount, and has set a maximum price of 85 percent of face value and minimum 15 percent discount, they added.

The first auction has been set for May 20 and the process is expected to be completed by July 14.

The proceeds of the sale of DTS will be used to repay tranche 1. The remaining 200 million euros will buy back some tranche 2 and 3 paper, one of the bankers said.

Prisa is planning to convert nearly a third of tranche 3 into the quasi-equity PPL, which will start in around a month when the DTS sale is signed, the banker added.

Some banks may be unable to keep the deeply subordinated PPL on their books and may have to sell, but some larger banks have already made provisions to keep it.

"Some of Prisa's smaller lenders could sell but the big holders of Prisa's paper such as HSBC, some of the French banks and the big Spanish banks like Santander and Bankia will probably be okay with the new PPL paper and support the company," one banker said.

Some banks sold Prisa's loans in March and April following December's formal debt restructuring after distressed investors offered up to 80 percent of face value. The loans were trading at 69 percent at the beginning of March, according to Thomson Reuters LPC data.

BBVA sold 33 million euros of Prisa's loans this week at 78-80 percent of face value and Natixis also sold a 90 million euro block of loans recently.

These trades follow earlier sales in April by BNP Paribas, which sold a 50 million euro block, and Spain's Novagalicia Bank, which sold 33 million euros.

The sale of DTS requires approval from European competition authorities as Telefonica will control about 80 percent of the local pay-TV market after the acquisition which is expected to take 12-18 months.

If the sale fails, the conversion of Prisa's tranche 3 debt to PPL will still go ahead, one of the sources said.

($1 = 0.7214 Euros) (Editing by Tessa Walsh)

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