RLPC-Banks line up 1.5 bln euro loan to buy TDF unit

LONDON, July 7 Mon Jul 7, 2014 11:45am EDT

LONDON, July 7 (Reuters) - Bankers are lining up a 1.5 billion euro ($2.05 billion) debt financing to back a potential formal bid for broadcasting masts group TDF's French unit by Canadian pension fund PSP Investment, banking sources said on Monday.

TDF owners TPG, Ardian, Charterhouse and French sovereign wealth fund FSI decided last year to sell the company, hiring Goldman Sachs and Rothschild to manage the process. They hoped to fetch 4 billion euros to be able to repay TDF's 3.8 billion euro debt pile and avoid a costly restructuring. [ID: nL5N0HC2FQ]

PSP and its partner Arcus -- an infrastructure fund -- have already made a verbal bid for TDF and are considering tabling a formal bid, one of the banking sources said, after they renewed their interest in the business earlier this year. [ID: nL6N0O7471]

"PSP is most probably trying to work out what price it is willing to go to and will then table a formal bid," the banking source said.

PSP and TDF declined to comment.

Dering Capital, founded in 2011 by Ben Jenkins, former Hong Kong head of private equity firm Blackstone, is also still interested in buying the unit from TDF, banking sources said.

Dering was in exclusive talks with TDF after it outbid rivals in an auction last year, offering about 3.7 billion euros for the French unit. Dering then missed a deadline for a fully financed bid in late February after struggling to raise the equity part of its offer. [ID: nL6N0ME3FS]

ACQUISITION FINANCING

The 1.5 billion euro financing for PSP and Arcus is expected to have an investment-grade style structure, unlike Dering Capital's 2.65 billion euros buyout financing, which was put together as a leveraged financing by BNP Paribas, Citi, Credit Suisse and Goldman Sachs. [ID: nL5N0LJ1QJ]

"PSP's debt is an investment grade deal. Dering needed more debt as it couldn't raise as much equity," one of the banking sources said.

In case the sale does not take place, bankers are also working on and amend and extend (A&E) of TDF's existing debt. This would take pressure off TDF and push out looming maturities as the debt starts to mature as early as next year, the sources said.

An A&E could also take place if TDF decides to sell a stake in the French unit rather than the whole thing, although agreeing an A&E with TDF's lenders could be tricky as leverage on the deal is high at around 8 times, banking sources said.

If lenders do not agree to an A&E then a restructuring of TDF's debt is expected. A debt restructuring, through the courts, could wipe out a portion of the loans in return for equity and put a more manageable, lower levered debt financing in place, the sources said.

A potential bid from PSP is pushing the price of TDF's loans higher on Europe's secondary loan market. Its senior and second lien loans were quoted as high as 98 percent of face value on Monday compared to 95 and 93 respectively on Friday, according to a trader. (Editing by Christopher Mangham)