| LONDON, March 10
LONDON, March 10 The tightly-contested battle
for French telecoms operator SFR between Numericable
and Bouygues is a win-win situation for lenders as
both bids are backed by loans of more than 10 billion euros
The loans are however very different. Numericable's
financing is a leveraged loan, which is targeted at
institutional fund investors and pays higher interest margins as
it is viewed as a more risky credit.
Bouygues' loan is a corporate-style investment-grade loan
that pays lower interest margins due to the reduced risk
associated with a higher credit rating.
Market conditions are equally strong for both sets of
financings. Europe's liquid loan markets have been waiting for
new event-driven M&A deals after low levels of activity in 2013.
"No matter what the deal looks like, it will be a very big
financing and will be one of the most interesting situations in
Europe's loan markets this year for sure," a leveraged finance
Europe's banks are eager to lend again and underwrite new
deals after strengthening their capital postions and cash-rich
investors want to put funds to work.
"There is huge appetite for large M&A financing from banks
and investors," a leveraged finance investor said.
Numericable's bid last week valued SFR at 14.75 billion
euros, which will leave owner Vivendi with a roughly 32 percent
stake in the new group.
Bouygues, currently France's third-biggest telecoms
operator, offered Vivendi 10.5 billion euros in cash and 46
percent of the new company after a planned spin-off. The bid
values SFR at 14.5 billion euros before synergies and 19 billion
euros after synergies.
As Bouygues' acquisition will merge SFR into Bouygues and
then carve out the combined telecoms company into a listed
company, a capital increase is planned at the time of the
Initial Public Offering (IPO) to increase investment capacity.
Numericable's bid for SFR is backed with a leveraged loan of
10-12 billion euros which is provided by Bank of America Merrill
Lynch, Barclays, BNP Paribas, Credit Agricole, Credit Suisse,
Deutsche Bank, Goldman Sachs, JP Morgan and Morgan Stanley.
The deal is expected to consist of loans and bonds in euros
and dollars to tap institutional liquidity in Europe and the US.
Up to 4 billion euros of debt could be raised from European
investors and banks to fund the acquisition, with the remainder
raised in the US, one investor said.
"They (banks) need to maximise capacity for a deal like this
so it needs to be well-structured and priced to keep investors
interested," a leveraged finance banker said.
Bouygues' bid is backed by a 10.5 billion euro corporate
loan. The deal was underwritten on a sole basis by HSBC and
signed on the day of the bid deadline on March 5 as Bouygues
wanted to keep a low profile before launching its bid, a senior
The investment-grade loan will finance the cash part of the
acquisition and provide working capital for Bouygues' operating
needs. HSBC is also acting as M&A adviser to Bouygues along with
The loan market is welcoming both bids and looking forward
to a significant new deal irrespective of the outcome of the
Even if Vivendi does not sell SFR, the French media and
telecoms giant will go ahead with its earlier plan to spin off
SFR as a separate unit this summer and is lining up around 7
billion euros of loans to support a demerger.
($1 = 0.7214 euros)
(Editing by Tessa Walsh)