Mid Europa Partners has raised €200 million of senior secured floating rate notes for the refinancing of Bite, a Baltic mobile operator, the firm acquired in 2007.
Mid Europa paid a margin of 7.5 percent above Euribor. Deutsche Bank was the global coordinator in the transaction and Credit Suisse acted as joint bookrunner. DNB Markets and Swedbank acted as co-managers and Swedbank provided a revolving credit facility of €20 million, according to a statement.
Bite had a bond outstanding that matures in March 2014, Michelle Capiod, a partner at Mid Europa told Private Equity International, and said the debt maturity has been extended until 2018.
“We had planned to refinance the existing debt in the first half of 2013, either through a bond, or through term loans. On the basis of the high-yield bond market being very active and with rates coming down quite significantly in December and January, we decided this was the right choice for this portfolio company,” she said.
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The refinancing comes as Bite has reduced its leverage in recent years from 6.2x at the end of 2009 to 3.6x as of September 2012. In July 2008, ratings agency Fitch Ratings revised the outlook on Bite, following slower than expected growth in the Lithuanian market.
“We had quite high leverage after the Baltic [economic] crisis and the negative impact this had on the business combined with the European Commission changes to the telecoms regulation, where mobile termination rights as well as roaming charges were massively reduced,” Capoid said. The deleveraging has been driven by strong EBITDA growth and cash flow generation, she added.
Mid Europa declined to comment on whether the refinancing was done with a possible divestment in mind, making the company more attractive for potential buyers, but Capiod agreed the refinancing “is all positive news for the company”.
It is understood the transaction was purely used for refinancing; no dividends were paid out. Capiod declined to comment on Mid Europa’s future plans to raise high yield bonds.
A source close to the matter said the firm is likely to do more bond deals in the future, given that the portfolio company is large enough to warrant the financing in excess of €185 million to €200 million.
Leverage in CEE
Last January, Mid Europa obtained €365 million in debt financing to recapitalise Mid Europa’s investment in the Czech Republic arm of telecoms group T-Mobile. Six banks teamed up for this transaction, which was one of the largest recapitalisations executed in Europe and the largest in Central and Eastern Europe since the collapse of Lehman Brothers in 2008, Mid Europa told Private Equity International at the time.
However the availability of debt financing depends on the country, Capiod said. “In countries like Poland and the Czech Republic we can access debt funding on relatively attractive terms. Here you have well established local banks that are quite keen to lend. In other markets like Romania and Bulgaria it is typically more difficult and more expensive to do financings due to less well-established legal and regulatory systems,” she said.
In addition, Mid Europa raised €330 million in December 2012 from eight regional and international banks for the recapitalisation of SBB/Telemach, two TV companies in Yugoslavia. While it’s “typically not easy to attract debt financing [in Yugoslavia]”, the firm managed to do so because of the “quality of that company and the relationships with certain banks in the region”, Capiod said.
Mid Europa’s high yield bond transaction is the latest example of private equity’s appetite for alternative financing. Last month, Loxam, an equipment rental group backed by 3i Group, successfully placed €300 million senior subordinated notes. In addition, Zobele Group, an Italian business backed by Doughty Hanson, reportedly placed a €180 million bond. In December 2012, Nordic Capital secured a €60 million five-year high yield bond for one of its portfolio companies, Orc Group, a Swedish financial technology company.