Telenet tests bank market

Bookrunners ABN AMRO, BNP Paribas and JPMorgan have launched general syndication of more than €1bn of the senior facilities underwritten ahead of the summer slump for Belgian cable business, Telenet.

General syndication follows an already completed senior phase which was conducted behind closed doors. The general phase targeted relationship banks and won commitments from, in order of size, Bank of Scotland, ING, SG, Dexia, KBI, WestLB, Fortis and RBS.

The deal in total is made up of a €175m seven-year revolver paying a margin of 212.5bp; a €530m five-year term loan A paying 225bp; a €307.5m six-and-a-half-year amortising term loan B1 paying 250bp; a €336m six-and-a-half-year term loan B2 paying 250bp; a €1.0625bn eight-year term loan C.

Leverage is 4.2x through total debt. The initial general syndication includes only the revolver, term loan A and term loan B1. Banks are invited to join on tickets of €30m or €15m, paying 60bp and 45bp respectively.

Investors initially knocked back what they considered an expensive transaction and so the leads have made substantial changes to the original €2.3bn deal.

In line with recent successful sell-downs in the US, they have cut the size of the offering, limiting the supply of paper on offer to investors and dipping less deeply into the liquidity in the market. It looks like it has been sized to the capacity of the relationship banks, said a source away from the deal.

In contrast to most recent US deals, though, the offer is made at par and the tranches now offered have been prepared to maximise the appeal to European bank investors. To that end, amortisation has been added, the maturity reduced and two maintenance covenants have been introduced.

“We want to tick every box in order to maximise the appeal to bank investors, and Liberty Global [the sponsor] recognised the importance of doing that,” said an official at one of the bookrunners.

The boxes being ticked reflect the new dominance of bank investors in the European market, a result of the fact that the CLO bid in Europe had not re-opened.

Though less than half of the total €2.3bn of underwritten debt is being offered, even the downsized deal is the largest European syndication to launch since the market was squeezed shut by the evaporation of liquidity in July.

The ability to access an existing relationship will not apply to most new-money deals, though the informal, behind the scenes early syndication is typical of the way the market has regrouped since the liquidity squeeze.

The relative conservatism of the gearing and structure, and the explicit targeting of bank investors mean that a successful syndication of the deal now offered will provide only limited insight into the true state of the market.

A successful sell-down would undoubtedly give comfort to other underwriters sitting on deals, though another arranger now offering a comparable credit in a favourable sector seems unlikely.

General syndication was launched on October 12 and a bank meeting is planned for the 18th. The original €2.3bn all-senior facility will recapitalise the business, which is 49.7% owned by Liberty Global, as well as support a dividend to shareholders.