Creditflux Newsletter

Distressed cable credit Numericable has finally pulled the trigger on a new bond deal that could see it paying debt yields of over 15%, but which could result in repayments at par for loan holders. The French company started roadshowing a €350 million seven-year bond issue today that could lead to an amend-and-extend of the company’s loans. Numericable needs to find at least €350 million to pay down bank debt, for lenders to wave through the amend-and-extend deal.

Numericable has been struggling to get to the bond market since last August. Since then, the yields at which it can hope to place paper have soared, requiring a waiver to the caps set by its loan holders. The caps were increased late last month. Numericable can now issue senior secured or senior unsecured bonds at a maximum all-in cost of 13.5% and 15.5%, respectively.

“There’s been a lot of to-ing and fro-ing with respect to the capital structure. It’s been contentious,” says Henry Craik-White, high yield analyst at European Credit Management in London. “There have been doubts about whether the company can support a bond with an all-in cost of 13% or more. Grumbling by some lenders has been offset by the prospect of a par repayment if the company does get a bond deal away.”

It appears that some lenders would have preferred the borrower to wait, in the hope of seeing it issue later at lower yields. Even by recent new issue standards, a yield of 13% or more for speculative grade senior secured debt is painfully high. At the same time, the company has barely enough liquidity to cover loan amortisations totalling €146 million this year.

Numericable’s lenders are not alone in facing a tough choice. “What we’ve been seeing is a bit of a phoney war, with companies not prepared to pay the price that’s needed to access the bond market,” says Chetan Modi, head of European high yield at Moody’s in London.  “However, the options for some are reducing. We are getting to a point where companies will reach a limit on how far they can hold off.”

Numericable, whose loans are widely held by CLOs, is a leveraged buyout owned by Carlyle, Cinven and historical shareholder Altice. Adjusted leverage including shareholder loans is in excess of eight times. The company is not publicly rated but its loans are thought to be shadow-rated in the triple C bracket.