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Couch-Potato Fight With Liberty Spurs Bond Sale: Poland Credit

Couch-Potato Fight With Liberty Spurs Bond Sale
Penetration of Polish TV, broadband and telephone packages is 28 percent compared with 49 percent in Germany and 64 percent in the Netherlands, according to Cyfrowy. Photographer: John Guillemin/Bloomberg

Poland’s second-largest cable-television company is relying on proceeds from its record bond sale to repel competition from billionaire John Malone’s Liberty Global Inc. and Warburg Pincus LLC.

Multimedia Polska SA sold 1.04 billion zloty ($320 million) of seven-year notes on May 10, the most ever by a Polish private company at home, data compiled by Bloomberg show. The company paid 325 basis points over the six-month Warsaw Interbank Offered Rate, or Wibor, 25 basis points more than planned, after extending bidding by two weeks. That would make the yield 6.09 percent, more than double the 2.98 percent for Polish government debt maturing the same year.

Cable providers are being drawn to Poland, the European Union’s biggest eastern economy, because penetration levels are half that of neighboring Germany even as unemployment rises, according to a website presentation by the country’s biggest TV network, Cyfrowy Polsat SA. Lower debt costs and an additional loan of as much as 500 million zloty that Multimedia is seeking might help it scoop up local smaller competitors.

“The size of the offering is impressive, especially for a company without state ownership,” said Fryderyk Krawczyk, who helps manage the equivalent of $3.1 billion at fund company Skarbiec TFI SA. “The industry is quite stable as you don’t usually cut your cable TV off even if you become jobless.”

Liberty, Vivendi

Yields on dollar debt from telecommunications and media companies fell 40 basis points this quarter to 4.5 percent on May 15, according to JPMorgan Chase & Co.

Multimedia competes for TV subscribers with the local units of Liberty, Vivendi SA and for Internet users with companies such as France Telecom SA. Warburg Pincus became a strategic minority investor in Inea SA, the fourth-largest Polish cable operator, the private-equity firm said in a statement on April 23 without disclosing terms.

Penetration of Polish TV, broadband and telephone packages is 28 percent compared with 49 percent in Germany and 64 percent in the Netherlands, according to Cyfrowy. Of the 14.5 million Polish households, 11 million use pay-TV services, it said.

Multimedia had 757 million zloty of outstanding unsecured bonds maturing between November 2015 and June 2017, according to data compiled by Bloomberg. The three notes paid 300 basis points, 350 basis points and 400 basis points over Wibor.

Spread Cut

“Thanks to the refinancing, we can put our funding structure in order and cut the spread,” Chief Executive Officer Andrzej Rogowski said in a phone interview on May 14. “This enables the company to operate in the years to come.”

Banks bought 46 percent of the bonds and 45 percent was purchased by Polish pension and mutual funds, the company said. The transaction was managed by Bank Pekao SA, the country’s second-largest lender, together with the local unit of Raiffeisen Bank International AG.

Multimedia wants to sign a deal with banks on a loan facility of 450 million zloty to 500 million zloty to fund acquisitions, Rogowski said. That will help boost its market share to 25 percent from 18 percent within four years, he said.

As Multimedia fights for users, its first-quarter net income dropped 23 percent to 14.4 million zloty as higher debt taken to finance acquisitions weighed on profitability, Multimedia said in a website presentation.

Rate Cuts

With the central bank’s benchmark interest rate at a record 3 percent, other Polish companies are also seeking to cut debt costs. Polkomtel, which provides high-speed mobile Internet, is in talks with banks on refinancing its zloty loans with new credit, Chief Financial Officer Joanna Nieckarz said in March.

Poland’s gross domestic product rose 0.4 percent in the year to March 31, matching the slowest pace since 2001 and undershooting the central bank’s forecast as well as the median forecast in a Bloomberg survey of economists.

The additional yield on Polish dollar bonds over U.S. Treasuries rose two basis points, or 0.02 percentage point, to 115 today, according to JPMorgan Chase & Co. indexes. The premium of 10-year zloty yields over German bunds rose six basis points to 192, data compiled by Bloomberg show. The zloty strengthened 0.1 percent to 4.1823 per euro as of 10:28 a.m. in Warsaw, reducing this year’s drop to 2.4 percent.

Default Swaps

Polish credit-default swaps fell four basis points to 73, data compiled by Bloomberg show. The swaps, which decline as perceptions of creditworthiness improve, cost 99 basis points less than the Markit iTraxx SovX CEEMEA Index of countries in eastern Europe, the Middle East and Africa. The contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower renege.

Polish corporate bond portfolios attracted 2.4 billion zloty in the first four months of this year, according to Warsaw-based fund monitor Analizy Online.

State-controlled Polskie Gornictwo Naftowe i Gazownictwo SA sold a record 2.5 billion zloty of bonds to investors last year while privately owned Polkomtel Sp z.o.o, the country’s second-largest mobile phone operator, controlled by Polish billionaire Zygmunt Solorz-Zak, issued 1 billion zloty of debt in 2010.

“The current markets are quite favorable for issuers as we’re seeing inflows to corporate debt funds and the Wibor rate is falling,” said Radoslaw Galecki, who helps manage an equivalent of $3.72 billion at Aviva Investors Poland TFI, in Warsaw. “Investors are looking for higher yields and companies with stable cash flows. There’s a lack of such big issuances.”

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