Belgian cableco Telenet intends to take on an extra €700m (US$864m) in senior secured debt to fund the buyback of 18.2% of its own shares via a tender offer.
The process is part of a capital restructure and amended shareholder remuneration…
Belgian cableco Telenet intends to take on an extra €700m (US$864m) in senior secured debt to fund the buyback of 18.2% of its own shares via a tender offer.
The process is part of a capital restructure and amended shareholder remuneration policy.
Taking advantage of favourable credit market conditions, Telenet Finance V Luxembourg, which operates as an independent financing company, will issue €500m of senior-secured fixed-rate notes, due 2022, in international debt markets.
In addition, Telenet expects to raise €200m in financing in the US dollar debt capital and/or loan markets before the end of the year.
“Going forward, Telenet intends to increase its total net debt to annualised EBITDA ratio to approximately 4.5x, which represents the higher end of the 3.5-4.5x net leverage target,” the company said.
The cableco intends to use the proceeds of the debt financing to fund its proposed share buyback, which forms the basis of a new shareholder remuneration policy.
“Telenet believes that the combination of the adjustment to the capital structure and the revised shareholder remuneration will allow for a more efficient balance sheet,” it said.
Telenet plans to buy back a maximum of 20,673,043 shares (18.2% of the company’s total share capital) at a price of €35 per share. However, the price will be adjusted downwards in accordance with distributions made before the tender closing date. These will include the €3.25 per share to be paid on 31 August in accordance with a capital decrease approved by shareholders on 25 April.
The company put the current market value of the proposed free float at about €1.217bn, assuming full take up of the offer. It will cancel bought-back shares immediately.
Majority shareholder Liberty Global-owned Binan Investments (LGI) will not participate in the proposed share buyback and consequently increase its stake from 50.04% to 61.18%.
Telenet’s previously-approved share repurchase programme of up to three million shares for a maximum €50m, announced on 16 February, terminated today. The company has already bought back 91% of allowed shares.
Rothschild is advising Telenet on the proposed self-tender offer.
Fitch Ratings announced this afternoon that it has downgraded Telenet’s long-term Issuer Default Rating (IDR) to B+ from BB, with a stable outlook. The agency kept the cableco’s short-term IDR at ‘B’. Fitch also downgraded the senior secured rating of the group’s outstanding secured debt from ‘BB’ to ‘BB+’, assigned an expected rating of ‘BB’ to the new secured issuance and gave recovery ratings of ‘RR2’ to the secured debt.
“While Telenet has consistently demonstrated strong pre-distribution free cash flow generation and an ability to deleverage, the level and debt-funded nature of distributions suggests a willingness to maintain higher leverage than previously anticipated by Fitch,” the agency said.
Moody’s, however, today affirmed Telenet’s ‘Ba3’ Corporate Family Rating and ‘B1’ Probability-of-Default Rating. The agency assigned the new senior secured facility a rating of ‘Ba3’, saying the notes are effectively pari-passu with the existing facility.
Major acquisitions ruled out
Separately, Telenet stated clearly that is not planning any significant acquisitions in the foreseeable future – ending speculation that it may bid for KPN’s Belgian mobile unit Base, currently up for sale.
The cableco said it believes continued investments in its fixed and core mobile networks and the right partnerships will “lay the foundation for future growth”.
“The increased leverage is fully sustainable in view of the steadily strong positive cash-flow generation, the projected future earnings growth and the significantly improved maturity profile of the group’s financial indebtedness,” the company stated.
