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PPF Partners, an investment vehicle backed by Czech billionaire Petr Kellner, is offering to backstop a EUR 200m equity injection in Greek Telecom Wind Hellas, a banker, an investor and a source close to the situation told Debtwire. Kellner is stepping into winner-takes-all brawl between the telco’s existing shareholders and its junior bond holders.
The surprise proposal emerged just days before a deadline expires for creditors to choose the final bidder for the troubled telecom owned by Egyptian businessman Naguib Sawiris. Creditors to the company worked today to evaluate Kellner’s plan against two existing bids from Wind Hellas’ sponsor Weather Investments and from subordinated note holders led by Aladdin Capital, respectively.
After a steep decline in revenues and cash flow in 1H09, the Greek company launched in August a restructuring of Hellas II, the issuer of the group’s EUR 931m and USD 275m FRN subordinated bonds due 2015. As part of the restructuring, management launched a sale process for Hellas II assets, which include all Wind Hellas shares and intercompany debt, and selected the two finalist bids last week.
The last-minute offer took Wind Hellas’ creditors by surprise, as the deadline for bidders to present their plans expired more than one week ago, the investor explained. “It’s an intriguing proposal but it is difficult to assess its credibility at the moment,” he added.
PPF Partners, which is backed by Kellner-controlled PPF Group and Italian insurance group Assicurazioni Generali, has been working closely with Greek entrepreneur Mike Germanos to finalize the bid for Wind Hellas. The parties have also been preparing a South East European broadband and mobile special situations vehicle that will have the ability to access PPF Partners’ capital, the investor, the banker and the source close said.
The Wind Hellas deal would be the vehicle’s first transaction with Kellner’s backing and would serve as a stepping-stone for building a South East Europe/Emerging markets TMT special opportunities vehicle, the source close said.
Long on cash, short on details
Under Kellner’s planned acquisition, PPF would provide Wind Hellas a further EUR 500m for purchases in the fragmented Greek telecom market, the investor, the banker and the source close said. As proposed, the borrower would engage in a significant de-leveraging exercise within 12-18 months of the acquisition, pending achievement of specific turnaround and consolidation milestones.
Although Kellner’s representatives have reached out to Wind Hellas, PPF has yet to conduct due diligence on the target, the banker said.
“The amount of information PPF representatives received [from] Wind Hellas to conduct due diligence was inadequate to put together a credible bid,” the source close said.
PPF’s deal does not specify how it would de-lever Wind Hellas’ balance sheet, the investor noted. The main assumption is that EUR 1.21bn of secured debt and USD 348m of 8.5% senior unsecured bonds would remain whole and receive an economic incentive to approve the deal, he said. But, he added, it remains unclear how PPF would treat the subordinated bonds.
“If these new guys really want to get involved, they need to get out with a rock solid financial plan, with details about what they are offering, and how they intend to delever the capital structure, and they need to do it quickly. Otherwise, nobody will take them seriously,” the investor said.
PPF Partners intends to give further details of its plans for Wind Hellas’ debt structure in the next few days, provided the M&A process is reopened, and is open to discussion with creditors on the economics of the proposal, the source close said.
Wind Hellas’ board of directors recently chose Weather Investments and the committee fronted by Aladdin as the two final bidders for Hellas II assets. Holders of the senior secured debt, the 8.5%s and EUR 250m RCF lenders will vote on the competing plans. In order for either plan to be approved, each class of creditors will need to deliver a majority vote. The final deal will likely be implemented via a pre-packaged administration in a UK court, sources previously told Debtwire.
The subordinated note holders’ proposal contemplates injecting around EUR 150m in fresh equity, plus an amount equal to the consent fees payable to senior creditors. The committee also offered to exchange their bonds in two new PIK (Pay-in-kind) instruments at a steep discount.
Weather Group, on the other hand, proposed a complete wipeout of the subordinated bonds through a cramdown in UK administration, said the investor and a bond holder.
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