Seat syndicate to repay debt after Lehman deal

Lehman Brothers has acquired a 12.38 percent stake in Seat Pagine Gialle, the Italian directories business acquired by a consortium of private equity investors in a €5.65bn deal last year.

Lehman Brothers, the US-based investment bank, has become the second largest shareholder in Italian directories group Seat Pagine Gialle after buying a 12.38 percent stake for around €804 million ($962 million).

Following the deal, the Sub Silver consortium – comprising BC Partners, CVC Capital Partners, Permira and Investitori Associati – remains the largest shareholder with a 50.14 percent stake. The consortium acquired a 62.52 percent interest when buying the business from Telecom Italia in August 2003.

Proceeds from the transaction, together with the payment of an extraordinary dividend approved yesterday by Seat Pagine Gialle shareholders, will allow the consortium to pay off almost the entire debt taken on the time of the buyout.

The payment of the dividend was enabled by the company’s successful placement of €1.3 billion of high yield bonds earlier in the week. Credit Suisse First Boston, Barclays Capital, BNP Paribas and Royal Bank of Scotland arranged the bond placement.   

The sale of equity to a new investor was made possible by the removal of a clause that prevented the consortium from selling any part of their stake for 18 months from the time of the buyout. A statement from Sub Silver said statutes had been “modified to make such an operation possible”.

Financial News said private equity sources not involved in the deal indicated that Lehman Brothers was likely to have received a management fee in exchange for taking on the stake.

The deal involved a total return equity swap agreement, which protects Lehman against fluctuations in Seat Pagine Gialle’s share price. This means Lehman will make payments to the consortium for any increase on the €0.8 per share it paid, while being compensated by the consortium if the price should fall below that level.

Lehman is expected eventually to place the shares it has acquired with other investors.