Telefonica SA (TEF), Spain’s largest telephone company, is seeking 1.25 billion euros ($1.7 billion) of credit lines to extend debt maturing in 2014, according to five people with knowledge of the transaction.
The deal comprises two 625 million-euro loans maturing in 2017 and 2018, the people said, who asked not to be identified as the terms are private. Banks have been asked to commit to the so-called forward-start deals, where financing terms are locked in before the existing borrowings mature, by the first week of February, they said.
The Madrid-based company is seeking to partially extend a two billion-euro loan signed in 2010, the people said. The debt backed Telefonica’s purchase of a stake in Brazilian mobile operator Vivo Participacoes SA, according to data compiled by Bloomberg.
The company is offering to boost interest margins on the drawn portions of the facility maturing 2017 to about 200 basis points more than the euro interbank offered rate, while the 2018 loan will pay 210 basis points, three of the people said. The current facility paid initial interest of 65 basis points more than Euribor, the data show. A basis point is 0.01 percentage point.
Banks must commit to both facilities and the debt will be allocated to lenders depending on their share of the existing loans, two of the people said.
A separate 1 billion-euro credit line maturing in July will either be repaid or allowed to expire, said the people.
Miguel Angel Garzon, a Madrid-based spokesman at Telefonica, declined to comment on the financing.
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