Seat Pagine tipped for buyback

Italian directories business Seat Pagine Gialle delayed announcing details of an expected share capital increases last week, but its bonds rallied on the back of speculation a rights issue could finance a €250m bond buyback.

Bonds were 48/50 at the end of November, outperforming a fairly dire market. The board met on November 27, but said it would not resolve the issue at that meeting. A new industrial plan is due to be presented to investors in mid-December.

Rothschild is reported to have been hired as adviser. Seat is understood to be trading close to a tight total leverage covenant but has already shown a willingness to aggressively tackle its debt burden.

A bond buyback would deleverage the business, and at current levels, could be achieved in a highly cost-effective way through a tender offer for notes heavily discounted as a result of technical pressure in the high-yield market.

In September the company made a voluntary early repayment of the remaining €30m of a €81.7m instalment of senior debt due to mature in December, while an early repayment of €51.7m was made in June. The company said September’s early repayment was made possible by high operating cashflow generation and was in line with a policy to prioritise the steady reduction of debt.

Between April 2004 and September 2008 Seat Pagine repaid €1.141bn of debt, including €255m arising from the securitisation of trade receivables, which took place in June 2006.

Though it is listed, Seat has a debt profile more like that of an LBO structure, with €3.1bn net debt at the end of September. It is controlled by a consortium of private equity owners, BC Partners, CVC Capital Partners and Permira.

The group operates in Italy, France, Spain, Germany, Belgium and the United Kingdom.

According to the company it expects to see an Italian recession impact the fourth quarter more severely than in previous quarters. It expects revenues from core businesses to drop between 2% and 2.5%. Group Ebitda is expected to exceed €600m for the year.