KDG refinancing nears

German cable provider Kabel Deutschland (KDG) is on the verge of refinancing all of its bank debt in the high-yield market, according to market observers. Deutsche Bank and Goldman Sachs have been linked with the €1.3bn floating-rate issue, though neither bank would confirm the mandate at this stage.

The issue will improve KDG’s cash position by removing the need to make amortisation payments, while dispensing with bank covenants that would restrict its fundraising, giving KDG additional flexibility to pursue an aggressive programme of capital expenditure linked to the upgrade of its cable network.

The company intends to invest approximately €500m over the next three years to offer triple-play services to close to 90% of the 15.3m German homes served by its networks.

The possibility of a refinancing has been mooted since sponsor Providence took a 95% controlling stake in KDG back in December 2005, buying out sponsors Goldman Sachs Capital Partners and Apax, who participated in the original LBO from Deutsche Telekom in March 2003.

KDG joins cablecom, which refinanced its bank loans from a position of strength with senior secured bonds last April. Cablecom was followed by TIM Hellas, which became the first European LBO to be financed entirely in the bond market.

KDG secured €1.4bn of bank debt in 2004 through Citigroup, Deutsche Bank, Goldman Sachs and JPMorgan. The company also has €400m of 10.69% PIK notes due 2014 at holdco level, and at opco level has US$610m of 10.625% senior notes due 2010 and €250m of 10.75% senior notes due 2012.