* Portuguese deal will now include leveraged loans
* Holdco/opco split also emerges (Adds expected size of loan)
By Robert Smith
LONDON, Jan 16 (IFR) - Altice is shifting its funding strategy for its upcoming Portuguese acquisition and will now include leveraged loans as well as a substantial amount of holding company bonds, according to sources close to the deal.
When Altice originally bid for Oi’s Portuguese operations in October, the cable and telecoms firm planned to raise mainly dollar bonds solely at Altice International, according to the sources.
Altice International includes the company’s cable and telecoms assets in far-flung geographies such as Israel and the Dominican Republic. The other half of the business is Altice France, which holds its French assets.
The listed holdco, Altice SA, sits above both of these businesses.
But Altice had to raise its offer to beat a rival bid from private equity funds Apax and Bain in December, while lowering the earn-out portion of the deal. This raised the cash consideration from around EUR4.5bn to nearly EUR5.7bn, according to the sources.
In order to fund this increase, the company will now have to raise a significant amount of debt at the Altice SA holdco, as it did on the record-breaking Numericable-SFR deal in April.
The company’s management are now priming the market to expect 65% of the deal to be funded at Altice International and 35% at Altice SA, according to an investor.
He added that this could be problematic for some investors, as Altice’s management indicated that holdco issuance would be infrequent when Numericable acquired SFR in April.
Plans have also shifted to include a new US$1bn-equivalent leveraged loan deal alongside bonds at Altice International, according to a banker on the deal.
“Most of the market had assumed the deal was going to be all-bond, so this may take some people by surprise,” he said.
Altice International has tapped the leveraged loan market before, raising a US$1.034bn term loan B in July 2013. That came during a nasty bout of volatility, forcing the company to drop a planned euro tranche and price at a significant discount.
The new loan is expected to include a euro tranche alongside a dollar tranche, however.
“The fact Altice was primarily an Israeli business was a stumbling block for European CLOs last time, but now the company is 70% in Western Europe this should not be a problem,” the banker said.
The rejigging of the deal reflects recent shifts in the market. Raising long-dated dollar bonds and swapping them back into euros was hugely attractive back in October, but the dollar market has sold off somewhat since then.
At the same time, the differential between issuers’ euro and dollar tranches has widened. Dutch cable company Ziggo raised a euro bond at a yield 125bp tighter than its dollar bond on Wednesday, for example.
This has made the benefit of raising funding in dollar bonds more marginal, pushing Altice to split its funding across multiple markets.
JP Morgan is set to lead the Altice SA holdco bonds while Goldman Sachs will lead the Altice International opco bonds.
Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan and Morgan Stanley have underwritten the debt raising, which is still dependent on a approval from Portugal Telecom SGPS shareholders at a vote on January 22.
Altice did not respond to a request for comment. (Reporting by Robert Smith and additional reporting by Claire Ruckin; editing by Alex Chambers, Julian Baker)