Weathering the market

Weather Investments has signed its agreement to buy a 63% stake in Italian telecommunications giant Wind Telecomunicazioni in what will be the largest leveraged acquisition in Europe. The bid values Wind at €12.2bn and beat a rival offer from a private equity consortium led by Blackstone.

Naguib Sawiris, controlling shareholder in Orascom Telecom Holding (OTH) and leader of the group, will also contribute his 50% stake in OTH to Weather Investments, taking the total transaction value to €17.2bn.

ABN AMRO, Deutsche Bank and Sanpaolo IMI are lined up to arrange the €9.1bn supporting debt package. A further loan is expected to be collateralised against the €5bn in OTH global depositary receipts used to effect the Sawiris family transfer.

The package will be split between €7.46bn in structured debt that will be syndicated and a €1.75bn bridge to a high-yield bond, which almost certainly will not be syndicated. This debt will be held at a Weather Investment subsidiary called Weather Italy. At €7.46bn, the leverage loan component will be more than double Europe’s previous biggest LBO loan, the €3.2bn facility that supported the buyout of Italian directories company SEAT Pagine Gialle in 2003.

Wind’s €7.46bn loan will comprise €2.56bn of new money and refinance €4.9bn of existing debt. Wind has many creditors with large exposures and the challenge for the MLAs will be to persuade these banks to roll over their commitments into a more highly leveraged transaction. There is also expected to be a very large subordinated debt component, probably in the form a second-lien tranche.

The €9bn debt will be just short of the US$10bn-plus loan that supported KKR’s buyout of US company RJR Nabisco in 1989, which still holds the record for the world’s largest LBO financing.