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KKR and Premira this month sold a 12% – EUR 377m – stake in their portfolio company ProSiebenSat.1 (Pro7) to repay a EUR 350m bridge loan issued by Pro7’s holding company, Lavena Holding 4 GmbH. That seemingly straightforward transaction will force the sponsors to repay an additional EUR 187m of Lavena’s debt to compensate for the collateral stripped away by the sale of the minority stake in the operating company, two sources familiar with the credit told Debtwire.
The private equity firms unloaded the stake despite the EUR 160m differential between the sale proceeds and the debt reduction in order to avoid paying the full sum of the bridge loan from their own pockets, sources familiar with the credit said.
ProSiebenSat.1, KKR and Permira all declined to comment.
KKR and Permira bought Pro7 last year and raised EUR 3.3bn through debt issued by Lavena Holding. They raised another EUR 4.6bn through the Pro7 opco to refinance existing Pro7 debt and to build a war chest for the acquisition of SBS Broadcasting Sarl (SBS).
When the SBS transaction entered its final stages, Pro7 found itself EUR 350m short, hence the issue of an additional 12-month bridge loan at Lavena. KKR and Premira reassured participants in the bridge by setting up the put for a 6% stake (12% voting) with Telegraf Media Group (TMG), thereby locking in the EUR 377m sale price.
But by selling the shares to TMG, the majority owners effectively reduced the amount of opco EBITDA counted against holdco debt in the calculation of leverage for Lavena Holding’s secured loans. TMG’s arrival into the capital structure has to be leverage neutral, as stipulated in loan documentation to Lavena Holding lenders.
As a result, KKR and Premira must repay EUR 186.5m of debt on top of the bridge loan maturity, said the sources. The leverage-related paydowns include pro-rata reductions to mezz and second lien amounting to EUR 48m and EUR 40.5m, respectively.
Lavena exercised its put option (put price: EUR 28.71 per share) forcing TMG to acquire the 12% voting interest at a total cost of EUR 51m below the value of TMG’s call option. TMG said it would finance the EUR 377m transaction from existing cash assets. Earlier this year in May, TMG announced that it would not exercise its call option (call price per share: EUR 32.61).
“There has been a little confusion in the market as to the timing of the repayments,” said one of the sources. “The EUR 350m which constitutes the equity bridge will be repaid in August, with the remaining EUR 186.5m is to be repaid in early October,” the source added.
Pro7 Holdco B/C debt is currently quoted at 69.5/70.5. The Holdco second lien is at 33/40 and the mezzanine paper is at 28.5/32.50. The company’s opco C2/C3 paper is at 80/81.50. Pro7 share price was EUR 6.20 today, up from a low of EUR 4.67 on 9 July. At the beginning of January, the share price stood at EUR 16.62.
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