Billionaire Drahi Pays Up in Record Junk Sale: Corporate Finance

Billionaire Patrick Drahi is offering concessions to win over U.S. investors as he finances the acquisition of Vivendi SA’s French phone unit with the world’s biggest junk bond offering.

As part of about $23 billion of funding in euro and dollar bonds and loans to buy SFR, Drahi may pay about 7.75 percent in interest on $2.9 billion of eight-year junk notes with a preliminary B rating from Standard & Poor’s. That compares with an average 5.93 percent for similarly graded debt securities due in about eight years included in the Bloomberg High-Yield (BUHY) Corporate Bond Index.

“This is Drahi’s big splash into the U.S. bond market and providing solid returns will play well,” said Chris Ucko, a New York-based analyst at debt researcher CreditSights Inc., which issued a report on the bond sale entitled “Priced to Make Friends.”

The leveraged buyout signals a return of confidence in the euro region, which was in danger of breaking up two years ago as Greece, Ireland, Portugal and Spain sought bailouts amid a sovereign debt crisis. The deal comes after Western European buyers announced $149 billion of acquisitions in the first three months of the year, a nearly 60 percent gain from the start of 2013 that outpaced increases in North America and Asia.

Photographer: Ivan Guilbert/Bloomberg

Patrick Drahi, billionaire and chairman of Altice SA, greets an attendee ahead of a news conference in Paris. Drahi, 50, is raising the financing through his Numericable Group SA and Altice SA units. Close

Patrick Drahi, billionaire and chairman of Altice SA, greets an attendee ahead of a... Read More

Close
Open
Photographer: Ivan Guilbert/Bloomberg

Patrick Drahi, billionaire and chairman of Altice SA, greets an attendee ahead of a news conference in Paris. Drahi, 50, is raising the financing through his Numericable Group SA and Altice SA units.

Numericable, Altice

Drahi, 50, is raising the financing through his Numericable Group SA (NUM) and Altice SA (ATC) units.

An external spokesman for Numericable and Altice, who wouldn’t be identified, citing company policy, declined to comment on the financing.

Numericable’s outstanding 225 million euros ($311 million) of 8.75 percent notes rose 2 cents to a record 118 cents on the euro yesterday, according to bond prices compiled by Bloomberg. The notes yield 4.7 percent, compared with 8.6 percent when they were issued in October 2012.

Demand from bond investors means that Numericable can cut the amount of cash it planned to raise in the loan market. It reduced one six-year deal to $2.6 billion from more than $4 billion and another to 1.9 billion euros from 2.6 billion euros. The loans are being marketed to pay interest of 3.75 percent more than benchmark rates.

‘Strong Demand’

“The way the bond tranches have changed shows the company has had some strong demand, especially out of the U.S.,” said Duncan Warwick-Champion, head of corporate research at ECM Asset Management Ltd. in London, which oversees $8.6 billion in credit. “Numericable has looked at where the demand is and where they can get the best pricing.”

Drahi, the Morocco-born founder and chairman of Luxembourg-based Altice, beat a competing offer for Vivendi SA’s SFR unit from Bouygues SA, which had the backing of the French government. Altice will own about 60 percent of Numericable after the acquisition, while Vivendi will hold 20 percent, and the remainder will be listed.

Numericable’s debt is rated Ba3, three levels below investment grade, by Moody’s Investors Service.

“This deal isn’t coming at aggressively low yields,” said Ucko, at CreditSights. “That compensates for the large size, the near-term risks in the French mobile market for investors and the likelihood that Drahi will probably want to come again to the U.S. bond market in coming years.”

To contact the reporters on this story: Julie Miecamp in London at jmiecamp@bloomberg.net; Katie Linsell in Madrid at klinsell@bloomberg.net

To contact the editors responsible for this story: Shelley Smith at ssmith118@bloomberg.net Michael Shanahan, Mitchell Martin

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.