SEAT strips out C tranche

SEAT Pagine Gialle, a BC Partners, CVC, Investitori Associati and Permira investment, confirmed pricing and structure on its €2.62bn refinancing. The deal is in the market to sub-underwriters. Changes in the structure will result in a 65bp decline in blended interest compared with costs on the original term loan B and term loan C tranches.

Rumours of a drop in pricing of up to 50bp across all tranches had circulated since news of BNP’s sole mandate several weeks ago. The structure firmed with a slightly less encouraging 40bp drop, but the real win for the company and its shareholders is the removal of the €750m C loan.

That tranche is the most expensive facility in the structure and its removal has cut blended interest costs on the higher-yielding term loans to 235bp from 300bp over Euribor.

The removal of the term loan C sees SEAT rework its senior debt to increase borrowings under an enlarged term loan A facility. This type of term loan is typically 25bp cheaper than an average term loan B and 50bp tighter than a term loan C. Term loan As are sold mainly to banks, which have less stringent return criteria than institutional investors.

The refinancing is split into a €1.93bn seven-year amortising term loan A at 185bp over Euribor, a €600m eight-year term loan B at 235bp over Euribor and a €90m seven-year revolver at 185bp over Euribor. Sub-underwriters are offered a single €225m ticket, earning a 12.5bp sub-underwriting fee and a 50bp participation fee.

One banker complained that the drop in the all-in fee, at 62.5bp, was too harsh at only half of that payable on the original deal’s top ticket. Another investor raised concerns that SEAT’s performance had been unremarkable since the original buyout and that leverage, at just over 6x, had not been reduced sufficiently from the original 6.4x.

BNP Paribas countered that free cashflow in the business had grown from €440m in 2002 to €638m last year, leading to the expectation that leverage would dip below 6x by the year-end. The private equity backers are not extracting a dividend, although they are loosening covenants, which might mean they will be able to take out equity at some point in the future.

Syndication is targeted primarily at existing lenders and the borrower can expect that Italian banks will step up to make up for any institutional investors that reduce participation or drop out of the deal entirely.

The original buyout was backed by €4.29bn in debt, which included a £75m seven-year tranche at 225bp over Euribor, a €1.25bn seven-year term loan at 225bp over Euribor, a €750m eight-year term loan at 275bp over Euribor, a €750m nine-year term loan at 325bp and a €150m seven-year tranche at 225bp.