LONDON May 9 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
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
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,
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.
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
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)