By Paul Deckelman
New York, June 18 - Kabel Deutschland Holding AG was heard by high-yield syndicate sources to have priced an upsized €400 million issue of five-year senior notes (B1/B) at par on Monday to yield 6½%.
The issue came at the tight end of pre-deal market price talk envisioning a yield of between 6½% and 6¾%.
The deal was brought to market via bookrunning managers Morgan Stanley & Co. Inc., Deutsche Bank Securities Inc. and Goldman Sachs & Co.
The bonds are being sold to qualified investors under Rule 144A/Regulation S for the life of the security. They carry two years of call protection, a two-year, 40% equity clawback provision - versus the standard three-year, 35% clawback seen on most bond issues - and a change-of-control put at 101% of principal plus accrued interest.
The quick-to-market bond deal from the holding company unit of Unterfoehring, Germany-based cable operator Kabel Deutschland GmbH was upsized from the €300 million originally announced earlier in the session, although it was less than the €600 million, which junk market players had been expecting for some weeks.
Proceeds from the deal will be used to repay about two-thirds of a €600 million bridge loan used to finance Kabel Deutschland's recently announced acquisition of Tele Columbus GmbH, believed to be the third-largest German cable operator after Kabel Deutschland and major competitor UPC Germany- UnityMedia, the latter company owned by global cable giant Liberty Global, Inc.
Under the terms of that deal, announced on May 21, Kabel Deutschland will acquire Tele Columbus for €603 million, including the repayment in full of about €600 million of Tele Columbus debt plus accrued interest, bringing the total price tag to some €618 million ($786 million equivalent).
The company said at the time the acquisition was announced that the €600 million bridge financing arranged by Morgan Stanley, Deutsche Bank and Goldman Sachs would be available for the 12 months following the announcement of the acquisition and may either be refinanced or will automatically roll into a permanent financing.
The company stated that total net debt leverage of Kabel Deutschland pro-forma for the acquisition would increase by 0.4 times EBITDA, but that its long-term leverage target of 3.0 to 3.5 times EBITDA remains unchanged, with pro-forma revenues expected to increase by about 11% and EBITDA by about 9%, excluding any possible synergies.
The acquisition will allow Kabel Deutschland to increase its customer base by around 1.7 million households, primarily in the eastern part of the country, including the cities of Berlin, Dresden, Magdeburg and Potsdam, where cable service penetration of the overall potential market - and particularly that for high-speed internet and other more expensive advanced services - is lower than in pre-unification West Germany and is thus considered a lucrative future growth opportunity.
The deal is subject to the approval of the German government's anti-trust regulators, the Federal Cartel Office. It is expected to close during next year's first quarter.
| Issuer: | Kabel Deutschland Holding AG.
|
| Issue: | Senior notes
|
| Amount: | €400 million (upsized from originally announced €300 million, though downsized from market expectations of €600 million)
|
| Maturity: | July 31, 2017
|
| Bookrunners: | Morgan Stanley & Co. Inc., Deutsche Bank Securities Inc. and Goldman Sachs & Co.
|
| Coupon: | 6½%
|
| Price: | Par
|
| Yield: | 6½%
|
| Spread: | 603 basis points over 0.5% German government OBL due April 7, 2017
|
| Call : | Make whole call at B+50 prior to July 31, 2014; then at 104.875%, 103.25%, 101.625%; finally at par on or after Jan. 31, 2017.
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| Equity Claw: | For up to 40% of issue at 106½% until July 31, 2014.
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| Change -of-Control: | Putable at 101% of principal, plus accrued interest
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| Trade Date: | June 18
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| Settlement Date: | June 21 (T+3)
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| Distribution: | Rule 144A/Regulation S for life of security
|
| Marketing: | Quick to market
|
| Ratings: | Moody's: | B1
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| S&P: | B
|
| Price talk: | 6½%-to-6¾%
|
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