High-yield bridge eases TIM Hellas exit

Egypt’s Weather Investments, the new owner of TIM Hellas, will retain the capital structure put in place when the number three Greek mobile phone operator was refinanced in December. Weather is paying €500m and assuming €2.9bn in debt to buy TIM Hellas, which sponsors pulled from a proposed auction in 2006. The debt element includes a €1.4bn three-part offering issued in December.

The deal draws together two significant names in the European high-yield bond market – TIM Hellas and Weather’s majority owned emerging markets operator Orascom. However, it will cause little upset, as Weather – which also owns Italian operator Wind Telecom – is set to retain discrete financing for each company in the expanded group.

One market observer suggested the alignment of credits might see some investors reorder high-yield portfolios to spread any potential risk. After the acquisition announcement, Fitch maintained TIM Hellas’s issuer default rating at B with a stable outlook.

Sponsors Apax and Texas Pacific Group (TPG) rejected an M&A sale in December, turning to the high-yield market when an auction failed to meet exit expectations. TIM Hellas instead tapped the high-yield market for a recapitalisation that provided both a significant dividend and acted as a bridge to last week’s sale.

That decision to pitch auction bidders against returns available in the high-yield market paid off with the announcement of the eventual sale. Weather was not among the bidders to submit a binding offer by November 30, but came to this latest deal buoyed by the success of Orascom’s hugely oversubscribed €750m bond.

Orascom increased the size of the issue from a planned €500m, having attracted a book of US$11bn. The success indicated the extent to which the emerging markets telecoms company has emerged as a respected high-yield credit since the buyout of Wind.

Weather’s acquisition will trigger a mandatory change of control tender at 101 for TIM Hellas’s €2.9bn outstanding bonds, but that is well below the secondary trading level of any of the four elements of the TIM Hellas structure. TIM Hellas was refinanced in a €1.4bn three-part offering in December through Deutsche Bank, JPMorgan, Lehman Brothers and Morgan Stanley.

The December deal not only provided a bridge to a sale but also generated a cash dividend for the sponsors just two months before disposal. That rapid series of returns is likely to be the focus of envious looks from other sponsors approaching exits.