Hungary’s Magyar Telecom (Matel) has entered into an agreement with noteholders to carry out a financial restructuring aimed at reducing debt and related interest costs, strengthening the capital structure and providing extra cash to invest in…
Hungary’s Magyar Telecom (Matel) has entered into an agreement with noteholders to carry out a financial restructuring aimed at reducing debt and related interest costs, strengthening the capital structure and providing extra cash to invest in “growth initiatives”.
Matel, which is based in the Netherlands but operates in Hungary via subsidiaries, announced that the “informal” noteholder group, which represents about 40% of its outstanding €328.96m of 9.5% senior secured notes due 2016, have signed a restructuring agreement.
The agreement, subject to requisite approvals, will see €155m of the existing notes either retained or exchanged into new, reinstated notes, the telco said in a release. The reinstated notes will bear cash interest at 7%, subject to a PIK toggle, and PIK interest of 2% from 15 June 2013.
“The PIK toggle will allow the company to capitalise a portion of the cash interest at a rate of 9% to the extent necessary to maintain a minimum liquidity level of €10 million,” the telco said.
The remaining €174m of existing notes and accrued interest will be converted into 49% of the pro-forma, post-restructuring equity in the telco.
€21 of the existing notes, held by Magyar Telecom in treasury, will be written off when the transaction closes.
Acting as the equity sponsor, private investment firm Mid Europa Partners will invest €25m when the restructuring closes, specifically €15m in equity and €10m in debt. The latter will rank pari passu with the reinstated notes. The €15m in equity will be used to buy back the reinstated notes via a reverse Dutch auction. Mid Europa will retain 51% of the pro-forma, post-restructuring equity in the group, subject to certain conditions.
Upon closing, Mid Europa will be able to appoint a majority of Matel’s board of directors. Noteholders, in their capacity as shareholders, will also be able to appoint directors.
Mid Europa will not be paid for management or other services, but will receive payments on notes and be eligible for 3% to 5% of net sale proceeds.
Matel has invited other noteholders who are interested in signing the restructuring agreement to contact the legal advisers to an ad hoc noteholder committee, London-based Bingham McCutchen.
Matel has appointed Lucid Issuer Services as information agent.
The telco expects the restructuring will be completed by 15 October this year.
Matel’s cash balance as of 31 May stood at HUF6.945bn (US$31.2m). Its projected total revenues for the end of 2013 are HUF47.97bn (US$215.45m). The company announced in February that it was undertaking a review of the group’s capital structure in light of new tax laws and the tough Hungarian macroeconomic environment. Houlihan Lokey was hired as financial adviser for the review, and White & Case as legal adviser.
