* Orders flood in for Portugal bond deal
* Bonds set to come tighter than whispers
By Robert Smith
LONDON, Jan 27 (IFR) - The EUR4.6bn-equivalent bond backing Altice’s acquisition of Grupo Oi’s Portuguese operations is already “multiple-times subscribed,” according to a banker close to the deal, which should allow the borrower to get competitive funding levels.
The deal was officially launched on January 23, following approval from Portugal Telecom SGPS shareholders the previous day, and is not scheduled to price until Friday despite the flood of early orders.
“It’s now just a pricing exercise,” said the banker.
“Most of the early orders were from hedge funds, but all the long-only funds are starting to come in as well.”
The gathering momentum means that the deal looks set to come at tighter levels than the price whispers floated last week.
The US$2.06bn dollar tranche of Altice International’s 8NC3 senior secured bonds was whispered at a low to mid 7% yield last week, according to an investor, while the EUR500m euro tranche was 125bp tighter in the low 6% range. The US$385m 10NC5 senior notes meanwhile were whispered at mid to high 8%.
At the Altice SA holding company, the whisper on the US$1.775bn dollar tranche of the 10NC5 senior bonds was mid 8% yield, with the EUR500m euro tranche 125bp tighter.
Altice’s outstanding bonds have ripped tighter in the secondary market since the new deal was announced, with some notes bid up to 50bp tighter. The banker said this has led some accounts to place orders as tight as high 5% yield on the euro senior secured tranche, for example.
He added that the expectation of a heavily oversubscribed deal is partly triggering the tightening in the outstanding bonds.
“If you want exposure to Altice, you may find it easier to buy existing bonds instead of waiting for the new deal and discovering your allocation has been scaled back 80%,” he said.
“Another factor is that people are now understanding the logic behind Altice’s purchase of Portugal Telecom. Before the roadshow began, accounts in the US particularly didn’t understand why this it was more like a cable asset than an incumbent telco.”
Altice has traditionally bought cable companies rather than a large fixed-line telecoms operator like Portugal Telecom.
But on a call with investors last week, Altice’s CFO Dennis Okhuijsen said: “We think of it more as a cable operator than a real traditional European incumbent.”
This is due to factors such as Portugal Telecom’s high “fibre to the home” broadband coverage. The Portuguese network Altice is buying has 54% coverage on this basis, compared to just 1% at British fixed-line operator BT.
It also has a strong 4G network, with 95% population coverage.
“Whether it’s cable or telco is neither here nor there for me, it’s all just spin,” said one bond investor, however.
“It really hinges on whether or not they can cut costs.”
Altice has a history of buying under-developed businesses and then massively increasing margins. On the same investor call, Okhuijsen said that Altice thinks it can raise Portugal Telecom’s 39% Ebitda margin to around 50%. (Reporting by Robert Smith, editing by Helene Durand, Julian Baker)