RLPC-UPDATE 2-Virgin Media's loan waiver eases repayment crunch

By Tessa Walsh

LONDON, (Reuters) - Cable operator Virgin Media (VMED.O) said on Monday it had won approval from its lenders to postpone looming debt repayments on its 4.4 billion pounds ($7.1 billion) senior leveraged loan.

The move will delay 2.075 billion pounds of amortising repayments that were due between now and 2012, the company said, and will reduce pressure on the company's business plan in the face of an economic downturn.

Virgin Media's senior loan consists of 4.3 billion pounds ($7 billion) of term loans in A, B and C tranches and a 100 million pound revolving facility.

The loan would normally have been refinanced by mid 2009 to avoid the payments, or the company would have been sold, banking sources said, but tough loan market conditions prompted Virgin Media to address the issue well in advance.

The passing of the waiver by Virgin's banking syndicate is positive for the company and is also due to the company's careful handling of its banking syndicate, banking sources said.

"It's a good thing for the company to have addressed a large looming upcoming payment," a leveraged loan analyst said.

Other recent waivers, such as a proposal that would have allowed Amadeus to buy back its debt, have been rejected as investors take a harder line on risk compensation due to an anticipated rise the default rate as the economic downturn piles pressure on riskier non-investment grade companies.

"This was a softer waiver around amortisation rather than underperformance, its easier for investors. Dealing with the issue ahead of time was very responsible and the company compensated its lenders," a leading leveraged investor said.

TWO OPTIONS FOR LENDERS

Virgin Media offered its lenders two options - to remain in the existing loan or to accept significant improvements to existing margins and fees in return for agreeing a number of changes.

The option means that the company's core loan will be a mix of old and new going forward, banking sources said.

Virgin offered a 100 basis points (bps) fee to each lender under the term loan A and B tranches and the revolving credit. Lenders on the term loan A were offered an additional margin increase of 137.5 bps and term loan B lenders were offered a margin increase of 150 bps.

The amount of relief on Virgin Media's amortising repayments depends on how many lenders accepted the new terms, banking sources said.

The waiver already had the approval of the company's top ten relationship banks and most lenders are expected to find the new terms attractive, sources said.