Ziggo to Repay Bonds as It Seeks $5 Billion of LBO Financing

Ziggo NV is reorganizing most of its debt as it seeks to raise 3.7 billion euros ($5.1 billion) of loans to help finance its leveraged buyout by John Malone’s Liberty Global Plc.

The Dutch cable provider is offering to repay or replace about 2.4 billion euros of its bonds, according to statements filed to the Luxembourg stock exchange. Some of the notes include restrictive clauses or must be repaid if ownership of the company changes.

Liberty Global agreed today to acquire Ziggo in a deal valuing the Utrecht, Netherlands-based company at about 6.9 billion euros, according to a joint statement. The takeover of Ziggo, with 2.7 million customers and about 3.1 billion euros of borrowings, will be funded with new debt that will push up its leverage ratio to about five times from 3.5 times, according to company statements.

“Leverage at about five times is a typical Liberty Global deal structure,” said Thomas Samson, a London-based portfolio manager at Muzinich & Co., which manages about $27 billion. “Everyone likes the cable sector at the moment.”

The increase in Ziggo’s leverage is “consistent with Liberty Global’s overall financial philosophy,” it said in today’s statement. Virgin Media Inc. raised about $8 billion of debt last year to finance Liberty’s acquisition of the company. Virgin’s leverage ratio increased to 5.2 times after the deal from 3.6 times at the end of 2012, according to Fitch Ratings.

Ziggo plans to meet with lenders in London and New York on Jan. 28 to market the eight-year loans, according to a person with knowledge of the facility, who asked not to be named because they’re not authorized to speak about it.

Bond Offers

Ziggo offered to buy back 750 million euros of 3.625 percent bonds due March 2020 at 101.5 cents on the euro, according to the filing. Holders of the senior secured notes have the right to demand repayment at 101 cents if control of the company changes, according to data compiled by Bloomberg based on the bond documents.

The company also wants to swap its 8 percent senior unsecured bonds that include a change of control clause. Ziggo can’t force investors to redeem the notes until May 15 without paying a penalty and will have to pay 104 cents on the euro after that, the data show. The notes are quoted at 105.75 cents on the euro, according to Bloomberg generic prices.

Ziggo also intends to redeem 750 million euros of 6.125 percent notes due November 2017, according to the filing. The company has the right to buy back the senior secured bonds in March at 103.06 cents on the euro. The securities are quoted at 103.08 cents, Bloomberg data show.

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