Wind Bonds Surge After Report About Merger Talks With Russia's VimpelCom
Bonds of Wind Telecomunicazioni SpA soared after owner Egyptian billionaire Naguib Sawiris was reported to be in talks to merge the company with Russian operator VimpelCom Ltd. to create a $25 billion business.
Wind’s 348 million euros ($440 million) of 12.25 percent pay-in-kind, or PIK, bonds due 2017 jumped 8 cents to 103 cents, according to pricing data compiled by Bloomberg. The Rome-based company’s 1.25 billion euros of 11.75 percent secured notes, also due 2017, gained 3 cents to 110.5 to yield 9.6 percent.
VimpelCom, based in Amsterdam and traded in New York, was formed by Russian billionaire Mikhail Fridman’s Alfa Group and Norway’s Telenor ASA to consolidate holdings in Russian and Ukrainian mobile-phone operators. Sawiris would become a significant minority investor in the company formed by a merger, which would include Wind and Weather Investments SpA’s 51 percent stake in Egypt’s Orascom Telecom Holding SAE, two people familiar with the matter said last week.
“People are thinking they’ll be in a much lower leveraged business with pretty much no chance of impairment now,” said Jonathan Moore, a high-yield analyst at Evolution Securities Ltd. in London. “There’s probably still some upside, though there’s still some uncertainty about whether the deal actually happens and, if it does, what happens to the PIK.”
PIK notes allow the issuer to make interest payments with more debt rather than cash.
Standard & Poor’s rates Wind B+, four steps below investment grade, and Moody’s Investment Service grades it a level higher at Ba3. VimpelCom Ltd. has no debt and isn’t rated, S&P said.
VimpelCom is 39.6 percent-owned by Telenor while Alfa’s Altimo unit controls 39.2 percent and minority shareholders own 21.2 percent, according to VimpelCom’s Web site.
The company’s Vimpel-Communications unit is rated Ba2, two levels below investment grade, at Moody’s and a level higher at BB+ by S&P. The company’s $800 million of 8.375 percent notes maturing in 2013 were unchanged at 105 cents on the dollar, according to Bloomberg data. Its $1 billion of 9.125 percent bonds maturing in 2018 gained 0.49 cent to 113.5, the data show.
To contact the reporter on this story: John Glover in London at johnglover@bloomberg.net
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