(Recasts story, adds further financing details)
By Robert Smith and Claire Ruckin
LONDON, April 9 (IFR/RLPC) - Numericable has launched 6.55 billion euros ($9.04 billion) of loans which backs its acquisition of Vivendi's telecom unit SFR and refinances the French cable company's existing debt.
The jumbo covenant-lite loan is expected to soak up excess liquidity from European and global investors, which have had few opportunities to lend due to a lack of new European buyouts in 2014 so far.
"The market wanted a mega-deal and this is definitely that. Given the asset and credit quality, this deal is expected to tick all the boxes," a banker said.
Numericable, which beat off a bid from rival Bouygues to buy SFR, is financing the acquisition with a 16.5 billion euro debt package which includes loans and bonds denominated in euros and dollars.
The debt was underwritten by a group of nine banks. Joint global co-ordinators Deutsche Bank, Goldman Sachs and JP Morgan have been joined by Barclays, BNP Paribas, Credit Agricole, Credit Suisse, ING and Morgan Stanley.
The 16.5 billion debt financing includes 11.64 billion euros of funded debt at Numericable and SFR's operating company, which is split between a 5.6 billion euro-equivalent term loan B and 6.04 billion euro-equivalent of bonds.
The package also includes 4.15 billion euros of bonds at Altice's holding company. Cable group Altice is the holding company of founder Patrick Drahi, Numericable's largest shareholder.
The financing also includes a 750 million euro five-year revolving credit, which pays 325 basis points (bps) over Euribor at the operating company level and a 200 million euro, five-year revolving credit which pays 425bps over Euribor at the holding company level.
The six-year term loan B consists of a 2.6 billion euro tranche and a 3 billion euro-equivalent tranche denominated in dollars.
The term loans are expected to pay an interest margin of 350-375bps, which are offered with a 75 percent Libor/Euribor floor, which guarantees returns to investors and a 99-99.5 Original Issue Discount (OID), banking sources said.
101 soft-call protection is also offered, which means that the deal cannot be refinanced for six months without paying a penalty.
The term loan finances the acquisition and will also refinance Numericable's existing 2.55 billion euros debt, 2.1 billion euros of which are loans and the remainder is bonds.
The refinanced debt will pay investors interest margins immediately, while the loans backing the acquisition will be funded when the M&A deal completes, which is expected in the third or fourth quarter of 2014.
Investors will be offered a 'ticking fee' as compensation until the M&A deal closes. Half of the interest margin will be paid 30 days after the financing is allocated and a full interest margin is payable after 60 days.
The ticking fee is likely to appease investors which were worried about making large commitments to the deal, but not being paid until the deal closes later this year.
"The ticking fee is good and what investors need. The deal needs to tap so much liquidity that the company has to be realistic with the terms and pricing on offer," an institutional investor said.
Bank meetings will take place in London on Thursday and New York on Friday for investors and commitments are due April 23 with allocations on April 24. The bonds are expected to launch on April 14.
Numericable's expected corporate rating and senior secured rating are both Ba3/B+. ($1 = 0.7249 Euros) (Editing by Alex Chambers and Tessa Walsh)