March 28, 2018 / 3:40 PM / a year ago

Imagina buyout debt delayed as investors hesitate

March 28 (LPC) - Syndication has been extended on a €920m leveraged loan financing backing Chinese private equity firm Orient Hontai Capital’s buyout of Spanish media group Imagina after the deadline for participation passed on Monday, banking sources said.

The deadline for commitments has been pushed to after Easter following a lukewarm reception from the market, several loan investors said.

This largely relates to corruption allegations circling one of Imagina’s US subsidiaries, Media World Sports, which Reuters reported on previously.

The latter’s chief executive and another executive pleaded guilty to corruption charges from the US Department of Justice in late 2015. Both are due to be sentenced in the coming months, according to the US Department of Justice documents.

“Even a whiff of corruption normally spooks investors from a credit,” a senior portfolio manager said.

While a number of investors are attracted to the business, other question its resilience, especially around contracts.

“There are questions over how much they pay for football rights and how they’ve gone about obtaining certain things in the business, subject to DoJ investigations and corruption charges. There are also contract cliffs,” a senior investor said.

The deal comprises a €200m six-year term loan A, a €660m seven-year covenant-loose term loan B and a €60m six-year revolving credit facility. The TLB includes a gross leverage covenant.

Some investors are waiting to see if pricing will be adjusted to increase the overall yields on offer.

The term loan A was initially guided to pay 400bp over Euribor, while the term loan B was guided at 450bp over Euribor, at 99 OID. Both are offered with a 0% floor.

“Whether people sell their soul for a little bit more spread, let’s see — it could make a bad deal become a good deal,” the second investor said.

Deutsche Bank is leading the deal, alongside Citigroup and Goldman Sachs.

Citigroup, Deutsche Bank and Goldman Sachs declined to comment. Orient Hontai Capital was not immediately available to comment.

Imagina is one of Europe’s largest audiovisual and sports media groups. Its subsidiaries include Mediapro, the sport TV rights distributor, film producer and audiovisual production centre operator.

Imagina had revenues of €1.54bn in 2016 and Ebitda of €162m.

Orient Hontai entered into exclusive talks with Imagina’s shareholders in May 2017, scooping a dozen other bidders, including French media group Vivendi, Chinese real estate and entertainment firm Dalian Wanda Group and US media company Liberty Media.

The deal was made at a multiple of 10 times 2016 Ebitda and valued the company at €1.9bn. Orient Hontai will take a 53.5% stake in the group. (Editing by Claire Ruckin)

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