German satellite broadcaster Sky Deutschland has secured approximately €738m (US$986.3m) in new long-term financing led by majority shareholder News Corp.
The financing is split between new €300m (US$401m) five-year bank credit facilities, which are…
German satellite broadcaster Sky Deutschland has secured approximately €738m (US$986.3m) in new long-term financing led by majority shareholder News Corp.
The financing is split between new €300m (US$401m) five-year bank credit facilities, which are guaranteed by News Corporation and its subsidiary News America Incorporated, and €438m (US$586m) through a new share issue.
The new bank debt will replace the company’s €419m (including €19m of accrued interest) of existing cash bank facilities, which will be repaid in full.
The facility is being provided by a banking syndicate comprising JP Morgan (lead arranger and lender), BofA Merrill Lynch, Citigroup, Deutsche Bank and UniCredit Bank.
According to Sky, the new debt has no financial covenants compared to the previous debt and will pay a margin of 1.125% per annum to the banking syndicate and 6% to News Corp for the guarantee.
As part of the deal, News Corp has also committed to Sky to act as guarantor to the German Football League (DFL) for the new Bundesliga broadcasting licence for the 2013/14 to 2016/17 seasons. News Corp will guarantee up to 50% of the amount of the annual licence fee for each season, reflecting the guarantee requirement for the 2013/14 season.
Sky stated when it won the rights back in April 2012 that it would be paying on average €486m a year for its Bundesliga broadcast package. As with the new debt, New Corp will receive an annual fee of 6% for its guarantee.
The €438m share issue takes the form of a private placement worth €347.4m and a subsequent rights issue targeting approximately €90.6m.
The private placement saw Sky sell 77.89 million shares, representing approximately 10% of the company, to News Corp’s subsidiary News Adelaide Holdings. The €4.46 per share paid was a 3% discount the Sky’s closing price on the Frankfurt Stock Exchange on 11 January 2013. As a result, News Adelaide now owns 54.5% of Sky.
The DTH provider will now carry out a pro-rata rights issue to existing shareholders. The subscription price will be set close to the market price, although cannot be higher than the €4.46 per share paid in the private placement.
News Adelaide has committed to exercise all of its subscription rights in relation to its newly increased holding and has also agreed to provide an unsecured shareholder 14% PIK loan if proceeds from the rights issue fall short of the €90.6m.
News Adelaide has also agreed to extend the term of the €106m of existing shareholder 12% PIK loans to at least six months after the maturity date of the new credit facilities.
JP Morgan, BofA Merrill Lynch and Citigroup are joint global coordinators and bookrunners with UniCredit Bank also a bookrunner for the equity offering.
Commenting on the financing, Brian Sullivan, CEO of Sky Deutschland said: “Our new long-term financing structure will give us the means and flexibility to take Sky to the next level and to continue with the execution of our strategy. We are very grateful for the support of News Corporation, as well as that of all our shareholders, as we continue to build an outstanding service for customers. We have never been in better position to exploit the potential of this underpenetrated and expanding market for premium pay-TV.”
The financing comes on the back of Sky being set to turn a profit for the first time with the company predicting a positive full year 2013 EBITDA. At the end of 2012, total customers had increased by 12% year-on-year to 3.63 million driven in particular by the uptake in its premium HD offer, which saw a 56% rise to 1.514 million subscribers.
