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Naguib Sawiris, the Egyptian businessman leading the €12.1bn ($14.7bn) takeover of Wind, the Italian telecoms business, on Wednesday launched the largest debt package for a European leveraged buy-out at a presentation in Rome attended by about 150 banks, institutions and hedge funds.
The €9.3bn of debt comprises a €7.55bn loan package that is being marketed immediately to a syndicate of investors, plus a further €1.75bn of high-yield paper, including €500m of PIK (pay-in-kind) notes.
An official at Weather Investments, the Wind acquisition vehicle, last month said the package could contain a €2bn high yield component, although bankers insist it had always been €1.75bn. In recent months, Europe's high-yield market has struggled.
The Wind financing, underwritten by ABN Amro, Deutsche Bank, and Italy's San Paolo IMI, will test capacity in Europe's debt financing markets.
A number of the instruments, including the high-yield component and €700m of second-lien loans, are among the largest ever to hit the market.
The Wind financing is being watched closely by the buy-out teams attempting to undertake the LBO of Auna, the Spanish telecoms business being auctioned for close to €12bn. Wind already has a wide pool of financing banks and has had debt facilities of more than €7bn, according to one of the underwriters. Telecoms is also a sector well-known by debt investors, which should also ease marketing.
For much of the past two months Europe's high-yield market has been shut, although small issues have trickled out recently.
Last week Foodcorp, a South African food producer, and Codere, the Spanish gaming group, reopened the market after six weeks of inactivity, but the two deals have not been followed up by further issues, indicating that demand is not as strong as it was earlier in the year.
This could prompt Wind to split its high-yield bond issue into a euro and a dollar tranche, to reach more investors. “The company is flexible on this,” said a person close to the transaction.
General syndication of the €7.55bn debt “should complete during the course of July,” one banker said. The timing of the high-yield bond launch and size of the PIK note offering is also flexible.