Representatives of the financing and investment community and of the cable industry were cautiously optimistic about expectations for 2012 during a panel session on financing at the Cable Congress in Brussels.
Speakers noted that investors are…
Representatives of the financing and investment community and of the cable industry were cautiously optimistic about expectations for 2012 during a panel session on financing at the Cable Congress in Brussels.
Speakers noted that investors are sitting on piles of cash, hungry for opportunities.
After a period of uncertainty due to the euro crisis in the second half of 2011, “things are looking quite right on the debt side at the moment,” Marisa Drew, MD at Credit Suisse, said. Investors are now much less worried about a potential break-up of the eurozone, “which has given them confidence to put a floor on the downside.”
Meanwhile, the upcoming IPO of Dutch cableco Ziggo is seen as a positive sign for equity markets, while being somewhat of a challenge for PE investors.
“Cable, as a sector, is becoming more and more attractive to public market investors. The IPO of KDG in Germany and other deals have brought to the sector a lot of attention and this is making it difficult for private equity to compete,” said Karim Tabet of private equity firm Providence.
Drew also noted that Basel III regulation, which will only fully come into force by 2019, increases capital requirements for banks and, in turn, affects their ability to lend. As a result, this will make it more attractive for cablecos seeking financing to turn to bond markets.
While markets stay volatile in Europe, big cablecos might prefer to tap the US dollar market in a trend that was already visible in the second half of last year.
At the same time, there will be significant need for refinancing during the period 2012/13 and 2014. This goes back to a number of LBOs during the period 2006 and 2007, Drew said, with many of those pre-crisis facilities expected to mature over the next three years. Again bond markets are expected to step in to help with these refinancing needs.
The panel agreed that high capex levels are not that much of an issue for investors, given that cablecos remain cash generative, making them attractive investments.
Thomas Franzen, CEO of ComHem, said: “We have good margins and good cash flow and our shareholders are comfortable with this”.
Drew agreed, saying: “As long as [investors] are seeing a return on capital deployed they will not see it as a utility.”
