LONDON Jan 31 Liberty Global gave
Europe's leveraged loan market a major boost with a 3.7 billion
euro ($5.02 billion) financing to back its acquisition of Dutch
cable company Ziggo that marks a departure from its traditional
approach to raising debt.
The loan market has become increasingly attractive as
borrowers take advantage of strong technical conditions
following a dearth of new money deals in 2013 to secure loans on
aggressive terms, as cash-rich investors and banks compete to
put money to work.
"The loan market is back," a senior leveraged loan banker
said. "It is slightly cheaper than the bond market and it
doesn't have restrictive non-call periods. Liberty is
comfortable with some covenants so there is no reason to go the
bond route. The loan market is here, it is more straightforward
A second leveraged loan banker added: "Liberty is
opportunistic and wants all markets to be big and meaningful.
The loan market has matured a lot in Europe and has a depth to
it which it didn't have 12 months ago. The size of new issue
that can be raised is attractive."
Liberty, controlled by US tycoon John Malone, frequently
taps the high-yield bond market and its decision to use the loan
market using a large lending group differs from its approach on
a number of earlier acquisitions.
The company's purchase of German cable firm Kabel BW in
March 2011, for example, was financed with a 2.25 billion euro
high-yield bond issue through three banks, while its acquisition
of Virgin Media last year consisted of a loan and bond financing
using five banks. The new deal involves 13 banks, with Ziggo as
Credit Suisse and Bank of America Merrill Lynch are global
co-ordinators, as well as joint bookrunners and mandated lead
arrangers alongside ABN AMRO, Credit Agricole, Deutsche Bank,
HSBC, ING, JP Morgan, Morgan Stanley, Nomura, Rabobank,
Scotiabank and Societe Generale.
"Liberty wants to build a better relationship with a larger
lending group on Ziggo, which makes the loan product more
attractive as it is easier to keep up with who is in the debt
rather than the bond market, which is more liquid and credits
are traded much more frequently," an investor said.
The 3.735 billion euro loan is split between a euro tranche
guided to pay 275bp-300bp and a US dollar tranche at
250bp-275bp. Both are offered with a 0.75 percent floor, a 99.75
OID and 101 soft-call for six months.
The loan has one leveraged covenant, covering net senior
leverage and total financial leverage.
By opting for a loan-dominated package, Liberty will also
benefit from better economics as it will pay a ticking fee until
the deal is done, as opposed to paying a full coupon on bonds in
escrow. The ticking fee kicks in after two months and totals
around half of the margins.
"The loan product is much easier when there are longer tails
on closing as bonds have to go into escrow," a third leveraged
finance banker said.
Despite mixed opinions on ticking fees, aggressive margins
and only one covenant, loan investors are expected to put in
large tickets by a February 4 deadline, eager to put some of
their cash pile to work.
"The credit is great but the yield is very, very low, which
could make it a tricky one for some funds. There is a lot of
liquidity in the market and ultimately it will fly out of the
door, but it is aggressive," a second investor said.
($1 = 0.7373 euros)
(Editing by Christopher Mangham)