Virgin Media/O2 launches new term loans to investors

By Sara Rosenberg

New York, Sept. 8 – Virgin Media/O2 held a lender call at 11 a.m. ET on Tuesday to launch new term loans (Ba3/BB-/BB+), according to market sources.

The debt consists of a pound sterling-denominated term loan A, a euro-denominated covenant-lite term loan B due January 2029 and a U.S. dollar denominated covenant-lite term loan B due January 2029.

Price talk on the U.S. and euro term loan B debt is Libor/Euribor plus 325 basis points with a 0% floor and an original issue discount of 98.5 to 99, sources said.

The term loan B debt has a ticking fee of half the spread for days 46 to 90 and the full spread thereafter, and includes 101 soft call protection for six months.

The company said it is getting £5.7 billion equivalent total facilities including term loan A, term loan B and other secured debt. A £2.45 billion equivalent senior secured notes offering was announced in the morning.

Lead bookrunning mandated lead arrangers are J.P. Morgan Securities LLC, Deutsche Bank Securities Inc. and BNP Paribas Securities Corp., with JPMorgan the left lead on the U.S. term loan B. Joint bookrunning mandated lead arrangers are BofA Securities, Inc., Citigroup Global Markets Inc., Credit Suisse, Goldman Sachs, HSBC Securities, Mediobanca, Mizuho, Morgan Stanley Senior Funding Inc., MUFG, Natixis and the Bank of Nova Scotia. Co-managers are Banco Sabadell, ING and SMBC. Scotia is the administrative agent.

Commitments for the U.S. term loan B are due at 5 p.m. ET on Thursday and commitments for the euro term loan B are due at noon ET on Thursday, sources added.

Proceeds from the term loans and notes will be used for general corporate purposes, including payment of any distributions at closing of the joint venture.

Liberty Global plc, the current owner of Virgin Media, and Telefonica SA, the current owner of O2, are merging these operating businesses in the U.K. to form a 50:50 joint venture. The combination of Virgin Media and O2 will create an integrated communications provider with £11 billion of revenue.

The transaction will include a series of recapitalization financings prior to closing to reach a target closing net leverage ratio for the joint venture of 5x, or about £18 billion of long-term debt. Net new proceeds from the recapitalizations are targeted to be around £6 billion.

After taking into account the recapitalizations, Telefonica is expected to receive £5.7 billion in total proceeds from the transaction and Liberty Global is expected to receive £1.4 billion in total, including roughly £800 million from the recapitalization of its retained and 100% owned Virgin Media Ireland business.

The transaction will not trigger a change of control under Virgin Media’s existing £11.3 billion of net debt and debt-like items that will be contributed in full to the joint venture.

Closing is expected around the middle of 2021, subject to regulatory approvals, consummation of the recapitalizations and other customary conditions.

Virgin Media is an England-based broadband provider. O2 is a Slough, England-based mobile platform.

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