Creditors of Hungary’s Magyar Telecom (Invitel) have approved the company’s scheme of arrangement for its financial restructuring.
However, its advisers are still hoping they will be able to complete the process by exchange solicitation…
Creditors of Hungary’s Magyar Telecom (Invitel) have approved the company’s scheme of arrangement for its financial restructuring.
However, its advisers are still hoping they will be able to complete the process by exchange solicitation instead.
For the exchange solicitation to take place, creditors holding at least 90% of the telco’s €328.96m 9.5% senior secured notes due 2016 need to validly tender them, the company said in a statement.
As those holding just 82.21% of the notes had done so by the initial 26 November deadline, it has been extended until 28 November.
The highly-leveraged telco, owned by private equity firm Mid Europa Partners, said the exchange solicitation will allow for a “mechanically simpler and more cost-effective” implementation of the restructuring, noting that it had had a “positive” response from creditors.
Stephen Phillips, a partner with law firm White & Case, advising Magyar Telecom on the restructuring, explained that the economics of the scheme and the exchange are identical.
Given how close the company is to the 90% threshold, a source close to the situation said he expects that level will likely be reached.
If the threshold is not reached, the restructuring will be implemented in line with the scheme. In that case, the final hearing to sanction the scheme will take place on 29 November. The whole process is expected to be wrapped up by the end of December.
Norbert Balint, an associate at law firm Wolf Theiss in Budapest, said he believes it is possible the 90% threshold will be reached, although he noted it may be difficult to secure the additionally required tenders in such a short timeframe if the creditors concerned have not decided to approve the exchange.
Magyar Telecom launched a strategic review of its capital structure in February in light of new tax legislation and the weak Hungarian macroeconomic environment. The company mandated Houlihan Lokey as its financial adviser for the review and White & Case as its legal adviser.
In July, the telco entered into an agreement with noteholders to carry out a financial restructuring aimed at cutting debt and generally improving the balance sheet. At the time, the company said the agreement, subject to requisite approvals, will see €155m of the existing notes either retained or exchanged into new, reinstated notes. The remaining €174m in notes and accrued interest will be converted into 49% of the pro-forma, post-restructuring equity in the telco. Meanwhile, €21m of the notes will be written off when the transaction closes.
As equity sponsor, Mid Europa will invest €25m when the restructuring closes, specifically €15m in equity and €10m in debt. The firm will retain 51% of the pro-forma, post-restructuring equity in the group, subject to certain conditions.
