Drahi Said to Plan Europe’s Largest Covenant-Light Loan for SFR

Billionaire Patrick Drahi plans to raise the largest covenant-light leveraged loan in Europe as part of 14.75 billion euro ($16.2 billion) financing backing his bid to acquire France’s second-biggest phone company.

A 5.5 billion-euro term loan B won’t include standard lender protections, said two people with knowledge of the matter, who asked not to be identified because the deal is private. The term portion along with about 5.5 billion euros of high-yield bonds and a 750 million-euro credit line will back the purchase of Saint Denis, France-based SFR from Vivendi SA.

A booming market for high-yield corporate debt is allowing Drahi to borrow at flexible terms as he proposes to merge SFR with his Numericable SA. The French wireless market has become one of Europe’s most competitive since a price war triggered by Iliad SA’s introduction of mobile-phone packages in 2012, some as cheap as 2 euros a month.

Covenant-light loans and bonds typically give companies more financial leeway as they don’t contain financial-maintenance provisions requiring a borrower to meet restrictions such as the level of debt relative to earnings before interest, tax, depreciation and amortization.

The deal will add to $5.4 billion of covenant-light loans raised by borrowers in Europe this year, after a record $24.5 billion was signed in 2013, according to data compiled by Bloomberg. The deal will exceed $4.1 billion of covenant-light loans Ineos Group Holdings SA raised last month, according to Bloomberg data.

The financing also comprise 3 billion euros of junior debt to Numericable parent Altice SA, the people said.

Exclusive Talks

Altice began exclusive talks with Vivendi on March 14 after it offered 11.75 billion euros in cash and a 32 percent stake in the combined business valued at 20 billion euros. Both Drahi and bidder Bouygues SA boosted their offers last week for SFR.

Arrangers of the debt financing may start syndicating the loans and bonds for the combined company next month after it obtains credit ratings, the people said.

Deutsche Bank AG, Goldman Sachs Group Inc. and JPMorgan Chase & Co. are coordinating the debt financing, said the people. Barclays Plc, BNP Paribas SA, Credit Agricole SA, Credit Suisse Group AG, ING Groep NV and Morgan Stanley are also arranging the deal.

Charles Fleming, a Paris-based spokesman for Altice at Havas, declined to comment on the financing.

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