TdF is back and aggressive

Investors are unhappy but seem resigned to the likely success of a tender approach for an aggressive repricing of the €3.97bn loan that supported Texas Pacific Group‘s buyout of Telediffusion de France (TdF). The original blowout syndication was unchecked by the aggressive 8x debt ratio. The amendment is being sought through bookrunners BNP Paribas and Citigroup.

The bookrunners are looking to reduce margins across almost all of the debt, with the A margin cut by 25bp to 175bp over Euribor, the B margin by 25bp to 200bp over Euribor and the C margin from 275bp to 225bp over Euribor. In addition, investors will be presented with a new price range on the second lien with a minimum reduction of 100bp to a new maximum margin of 350bp. Existing revolving credit facilities will not be affected.

There is no waiver fee in place, but the new package would include 101 soft call protection in the event of any further repricing in the next 12 months. That will be of little comfort to investors but any reaction is likely to be muted given the credit’s popularity and the highly liquid market.

TdF is a singularly strong credit that investors will be loath to give up. The business is one of the largest providers of over-the-air and wireless services to broadcasters and telecom operators in Europe. In its French home market it has a monopoly in broadcasting public TV and radio and a very strong position with the commercial TV and radio companies. It also has strong relationships with all three French mobile operators, Orange, SFR and Bouygues.

The original high leverage could be applied to the deal given TdF’s high cash conversion ratio and the long-term contractual nature of its business – which make it in effect an infrastructure investment.

The original facility closed hugely oversubscribed last year, through bookrunners BNP Paribas, Citigroup, HSBC, Merrill Lynch and Morgan Stanley. It was subject to both a structural flex that saw the mezzanine tranche dropped and spread among the second-lien, B and C tranches. And a price flex take 12.5bp off the B and C tranches.

In late 2006, TPG reached agreement with majority shareholder Charterhouse (55%) to acquire the operator of transmission towers for the audiovisual, mobile telecom and broadband media. Caisse des Depots et Consignation and CDC Enterprises hold stakes of 30% and 14% respectively.

Donal O’Donovan