Numericable and Altice shattered records today as they jointly priced the largest bond deal on record, at $16.67 billion combined in euros and dollars, surpassing TXU (Energy Future) domestically and NXP internationally. The deal also includes the third largest single tranche ever sold, a $4 billion tranche of eight-year notes, according to LCD.
Sources say the full $21.9 billion deal, which included roughly $10.9 billion in five bond tranches from Numericable, $5.8 billion from two Altice tranches, and roughly $5.2 billion in Numericable loans, pulled in more than $100 billion in orders. More than 700 accounts globally participated with numerous orders of as much as $1 billion, according to sources. A $100 billion order book would suggest the biggest ever in the history of the debt capital markets, the sources said.
With regard to the three U.S. dollar tranches, the five- and eight-year tranches came at the tight end of guidance at 4.875% and 6% respectively, while the 10-year notes printed tighter than guidance at 6.25% at par.
The five-year deal was upsized from $920 million to $1.8 billion, and finally to $2.4 billion.
The eight-year deal began at $2 billion, was raised to $4.2 billion, and then reduced to $4 billion, which is still the third largest single issuance on record.
The 10-year deal was downsized to $1.375 billion, from $2 billion.
Both the euro eight- and 10-year tranches printed tighter than guidance, at 5.375% and 5.625%, respectively. The eight-year deal was upsized from €1 billion to €1.6 billion, and then finally reduced to €1 billion, while the 10-year deal was cut from €1 billion to €915 million, and then upsized to €1.25 billion.
The combined $7.75 billion can be viewed as the most U.S. issuance sold at once, given that the $11.25 billion of TXU buyout bonds came in a piecemeal sale amid the credit crunch. Likewise, the $4 billion Numericable eight-year tranche can be seen as the second-largest sale, given the $4.93 billion Harrah’s/Caesars buyout bonds were, likewise, not sold in a single sale. The record single-tranche would then be $4.25 billion of 7.875% notes sold last fall by Sprint, according to LCD.
Earlier in the week the Numericable term loan was cut for more bonds as the company responded to demand, with investors noting better value on the bonds and desiring call protection. On Tuesday, Numericable also decided to drop the five-year euro tranche. This was a result of optimizing its capital structure: issuing in U.S. dollars and then swapping back into euros was ultimately cheaper. This was particularly the case on the five-year tranche, as the euro piece was initially guided at the same price talk as the dollar tranche, at 5%, based on the swap curve. Still, Numericable was keen to keep large euro benchmark offerings to maintain a strong European following, ultimately raising €2.25 billion combined in eight-year and 10-year notes at the opco Numericable, and €2.075 billion at the holdco Altice.
On the U.S. side, with the large upsizing of the five-year paper to $2.4 billion, sources reported a similar degree of oversubscription between the five-year and the $4 billion eight-year tranches relative to tranche size. Demand for the 10-year, meanwhile, was especially high after leads downsized that tranche by $625 million, allowing the leads to price inside of talk. Given the significant downsizing of the six-year term loan, the company wanted to offer a comparable replacement, thus significantly upsizing the five-year bond to keep in place a low cost, short duration option.
Meanwhile, on the Altice transaction, orders across both eight-year (non-call three) tranches reached $35 billion, including a $13.5 billion order book for the U.S. tranche, according to sources. Both tranches came at the tight end of guidance. The 7.75% dollar tranche was downsized from $3.1 billion to $2.9 billion, and the 7.25% euro tranche was upsized from €1.9 billion to €2.075 billion.
Comps included Wind, Sprint, T-Mobile, VTR, Unitymedia, and UPC Cablecom, but none of these were perfect matches, requiring the leads to do more work on price discovery, according to sources.
As reported, J.P. Morgan (B&D), Deutsche Bank, and Goldman Sachs are global coordinators on all tranches of the Numericable deal, while Goldman Sachs (B&D), Deutsche Bank, and J.P. Morgan are global coordinators for both Altice tranches.
The transactions are part of a multi-pronged M&A-related recapitalization under which Numericable is buying a stake in telecom firm SFR. Altice is financing an adjoining Numericable rights issue to increase its stake to 60% in the new Numericable/SFR joint venture. – Joy Ferguson