Telefonica has priced a €1.75bn (US$2.3bn) dual-tranche hybrid bond to part fund its planned acquisition of KPN’s German mobile operator E-Plus.
The two tranches of undated deeply subordinated reset rate guaranteed securities are for €1.125bn and…
Telefonica has priced a €1.75bn (US$2.3bn) dual-tranche hybrid bond to part fund its planned acquisition of KPN’s German mobile operator E-Plus.
The two tranches of undated deeply subordinated reset rate guaranteed securities are for €1.125bn and €625m and mark Telefonica’s first hybrid issuance.
The €1.125bn portion priced at par and has a perpetual maturity date. The five-year non-call securities have a rate of 6.5% until 2018. After this point the securities will accrue a fixed rate of interest equal to the applicable 5-year swap rate plus a margin of: 5.038 % until September 2023; then 5.288 % until September 2038; and finally 6.038 % after that point.
The €625m slice also priced at par and has a perpetual maturity date. The eight-year non-call securities have a rate of 7.625% until 2021. After this point the securities will accrue a fixed rate of interest equal to the applicable 8-year swap rate plus a margin of: 5.586 % until September 2023; then 5.836% until September 2041; and finally 6.686% after that point.
BBVA, BNP Paribas, Citi, HSBC, Morgan Stanley, Societe Generale, UBS and Unicredit were the joint bookrunners.
The five-year tranche was oversubscribed by 4.9 times and the eight-year tranche by 7.4 times after Telefonica accrued over €7bn in orders, according to one of the banks working on the transaction. The offering followed roadshows in London, Paris and Germany.
The notes have equity-like features, enabling the issue to be treated as 50% equity and 50% debt. This enables Telefonica to maintain its leverage ratio.
The E-Plus transaction is subject to regulatory approval and not expected to close before Q2 2014. The Spanish incumbent improved its offer for E-Plus in late August, from €8.1bn to €8.5bn. This won over major shareholder America Movil (AMX) which committed to vote in favour of the deal at a meeting on 2 October. KPN will retain a 20.5% stake in Telefonica Deutschland, nearly 3% higher than the 17.6% agreed originally. Telefonica will have a call option to acquire the 2.9% stake for €510m plus interest a year after completion of the sale.
