Apax and TPG profit from TIM Hellas recap

Greek Telecoms operator TIM Hellas Telecommunications just missed the European size record for a PIK issue last week when it priced a €500m note via bookrunners Deutsche Bank, Goldman Sachs and JPMorgan.

The unrated notes due 2014 were issued at par on Wednesday and priced in line with guidance at 8.25% over three-month Euribor. The notes will allow TIM Hellas to return a dividend to sponsors Texas Pacific Group and Apax Partners and pay down the existing PIK loan. After the dividend, the amount of equity left in the deal has been described as “nominal”, which means the two sponsors have effectively exited their investment. Despite this, the book was “well covered” via a majority of hedge funds with a few long-only accounts also involved.

The deal’s positive result shows that investors have bought in to the idea of an early takeout of the deal, either via a trade sale or an IPO. The call structure certainly supports this, as the notes are non-call for the first six months then callable at par for the following year.

After the “takeout window”, the premium steps up again to 102 between 18 months and 30 months, then at 101 up to 3.5 years and par thereafter. Moreover, should investors still be in the deal by October 15 2007, they will be compensated via a coupon that ratchets upwards by 2% should leverage still be above 5x, which is a full turn lower than at present.

TIM Hellas already has €1.125m of seven-year non-call one senior secured FRNs paying 350bp over three-month Euribor, including the €200m January tap, and €355m of 8.50% coupon eight-year non-call four fixed-rate senior notes.

Cognis retains the record for the largest European PIK issue with its €530m issue of January 2005. TIM Hellas was merged with Q-Telecom last October, following its purchase by the same two sponsors in a €350m LBO.