Hellenic Telecommunications €300 million four-year bonds talked at 4 5/8%

By Paul Deckelman

New York, Nov. 24 – Hellenic Telecommunications Organization SA was marketing a €300 million issue of new four-year, fixed-rate bonds on Tuesday, according to a regulatory filing.

Market sources said that the bonds would likely yield 4 5/8%, which is somewhat tighter than the 4¾% level at which the bonds had initially been talked.

There were expectations that the bonds – which will be issued by the Athens-based company’s British-domiciled financial subsidiary, OTE plc – would price on Tuesday, but no terms had emerged by the end of the trading day.

There was said to be considerable interest in the new issue, the company’s first foray into the bond market since July 2014, when it sold €700 million of 2020 notes.

By one estimate, underwriters HSBC Holdings plc, Citigroup Inc. and Deutsche Bank AG had received more than €500 million of orders for the new paper, much of it from domestic Greek investors, including holders of the company’s existing OTE plc bonds maturing in May 2016 and February 2018.

Proceeds from the offering are to be used to fund a tender offer, announced Monday, for its €250 million of the 2016 bonds and €50 million of the 2018 bonds.

The new paper will be guaranteed by corporate parent Hellenic Telecommunications Organization, also known as OTE SA. The company, Greece’s largest telecommunications operator, provides fixed-line phone service such as voice, broadband, data and leased lines as well as pay TV, ICT services and mobile telephony services in Greece and Romania and mobile telephony services in Albania.

In its regulatory filing on Tuesday, the company said that the stabilization period for the issue was expected to run for a month, through Dec. 24.

The issue will have an over-allotment facility for up to 5% of the aggregate nominal amount.

The new bonds will be issued through OTE plc’s global medium-term note program.

The bonds are not being offered for sale in the United States.

The bonds will be rated Caa2/B+.

In assigning the issue a Caa2 rating with a stable outlook – a higher rating than the Caa3 rating that it gives to Greek government sovereign debt – Moody’s Investors Service noted that OTE’s ratings “reflect (1) the fact that a non-Greek financial subsidiary (OTE plc, which is domiciled in the U.K. and subject to English law) issues its debt; (2) the fact that around 25% of OTE's revenues and 20% of its EBITDA are generated outside Greece; (3) Moody's expectation that OTE will maintain substantial cash balances of around €1 billion to pre-fund future bond maturities; and (4) the implicit support it receives from its largest shareholder, Deutsche Telekom AG (Baa1 stable).”

However, the agency also noted that “despite performing in line with its business plan and taking steps to insulate itself as much as possible from the Greek economy, the [Caa2 Greek] foreign-currency ceiling exerts pressure on the telecom company's ratings, keeping its creditworthiness closely linked to the economic environment in Greece.”

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