Casema set to shatter mezzanine record with E1bn tranche

The record for a single European mezzanine tranche could be shattered as Casema’s circa €4bn debt package is being prepared for launch later this month.

Although the structure has not been finalised, mandated lead arrangers ABN AMRO, Credit Suisse, Goldman Sachs, ING and Morgan Stanley have been sounding out mezzanine investors about their appetite for a €1bn mezzanine piece. This far exceeds the previous record of £460m seen on the LBO of gaming group Gala last autumn.

Responses so far indicate that there is plenty of liquidity for the deal, with market talk suggesting that orders of about €2.5bn have been proffered so far.

Mezzanine investors have also expressed confidence in the credit on account of the strong competitive position enjoyed by the combined Dutch cable assets of Casema, Multikabel and Essent Kabelcom. Leverage on the deal has been rumoured at between 7x and 7.5x net debt to Ebitda, which is being regarded as comfortably within the business’s ability to generate cash.

Attempting to get the deal away certainly makes sense as the high-yield market has absorbed a wave of cable sector deals in recent months. Many of the traditional liquidity sources for this sector might be, therefore, on or near their limits, which would probably have translated into upwards pressure on the deal’s pricing had it chosen the bond route.

Although the mezzanine market is untested at this level, the degree of oversubscription on other deals suggests that the market is sufficiently liquid to absorb a deal and that it was only a matter of time until the €1bn mark was reached.

Cinven and Warburg Pincus are the sponsors backing the three-way cable tie-up. Together, Kabelcom, Casema and Multikabel serve more than 3.3m customers and had pro forma revenues of about €870m for the financial year ended December 31 2005.