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Rlpc numericables bond increase hits loan market


* Huge bond demand allows Numericable to cut borrowing costs* Financing package raises 75 billion euros from the market* Disappointing loan syndication in Europe and USBy Claire RuckinLONDON, April 22 French cable company Numericable's decision to halve the size of a planned loan backing its acquisition of French telecom SFR to 2.8 billion euros ($3.87 billion) and boost its bonds to 8.4 billion euros is a blow for the leveraged loan market. Numericable slashed the size of a covenant-lite term loan from a planned 5.6 billion euros and increased its bonds from an original 6.04 billion euros on Monday after overwhelming demand from bond investors. Bonds are currently cheaper than loans for Numericable, which was able to adjust its debt package to get the best terms after huge demand from bond investors."All in, the bonds are coming in cheaper than the loans so it is obvious why the borrower would opt for the bonds," a loan investor said.

More than 50 billion euros was pledged for Numericable's 11.2 billion euros of bonds and loans and 25 billion euros was raised for holding company Altice's 4.15 billion euros of bonds, bankers said. Investors that are able to invest in both loans and bonds preferred the fixed-rate bonds which were offered with call protection that penalise companies for refinancing early."If you believe the company can deleverage significantly over the next 12 to 18 months then you get more upside buying the bonds than the loans," a leveraged banker said. The euro-denominated term loan B was cut to 1.75 billion euros from a planned 2.6 billion euros at launch. The US dollar denominated term loan B was also slashed to 1 billion euro equivalent from a planned 3 billion euro equivalent.

The loan will price at the wide end of guidance at 375 basis points (bps) from initial guidance of 350-375bps and will be offered with a 75bps Libor/Euribor floor and a discount of 99-99.5. LOAN DISAPPOINTMENT The loan had a disappointing syndication in Europe. Up to 1.25 billion euros of existing fund investors rolled into the deal, but only 500 million euros of new money was raised.

Banks were unable to roll into the covenant lite deal. Covenant lite loans are common in the US and have been accepted by European institutional investors, but remain difficult for banks as they offer investors little protection. The weak response from cash-rich European investors is surprising, bankers said, as investors have had few opportunities to join large liquid deals this year. One possible explanation is that the new-money element of the loan will not fund immediately and will pay a ticking fee unlike the bonds which start earning income immediately, along with the existing loans that are being refinanced."It is pretty disappointing that the deal hasn't taken a lot of liquidity out of the European loan market. The European loan market is hot but the bond market is much, much hotter," a second leveraged banker said. The size of the bonds and loans could be adjusted again before closing. High demand for the bonds is causing pricing to tighten, which is making the loan look more attractive again. Numericable's loan and bond debt package was underwritten by a group of nine banks. Joint global co-ordinators Deutsche Bank, Goldman Sachs and JP Morgan were joined by Barclays, BNP Paribas, Credit Agricole, Credit Suisse, ING and Morgan Stanley. Numericable was not immediately available to comment.

Rlpc taiwans fsc asks banks to explain low loan pricing


Nov 19 Taiwan's Financial Supervisory Commission (FSC) met Taiwanese banks on Tuesday to discuss competition between banks, which is driving pricing lower on Taiwanese dollar and foreign currency loans and could hit profitability. Taiwanese banks are some of the biggest lenders to Asian syndicated loans with a 20 percent share of the market, according to Thomson Reuters LPC data. The move could curb Taiwanese banks' appetite to lend to finely-priced loans and could even push loan pricing higher across Asia, banking sources said. The FSC's examination bureau met Bank of Taiwan, Mega International Commercial Bank and Taiwan Cooperative Bank on Tuesday which are three of the top lead arrangers of Taiwanese loans, according to LPC data. The bureau was not immediately available for comment at press time. Loan bankers from the three banks said that they had been asked to prepare information on all outstanding syndicated loans for the discussions."This is not an investigation, the FSC just wanted to know our pricing history," one banker said.

Taiwanese syndicated loans have some of the tightest loan pricing in Asia, according to LPC data. Average margins on loans by the three banks is around 100 basis points (bps) over the primary or secondary Commercial Paper (CP) rate for Taiwanese dollar loans and 190bp over Libor for US dollar loans. Domestic banks used to require minimum all-in pricing of 150bps for US dollar loans for companies using the funds in mainland China. In May, a $246 million equivalent, five-year loan for Taiwan's Fujian Fuxin Special Steel Co Ltd paid all-in pricing of around 120bps for US dollars and 130bps for Renminbi.

A $500 million, five-year loan for Formosa Plastics Group followed with top-level all-in pricing of 115bps for US dollars and 135bps for Renminbi. Formosa's loan is one of the deals that the FSC is looking at, according to Taiwanese media reports. The deal is the largest loan to be syndicated in Taiwan this year. Pricing on a $396 million equivalent five-year financing for Taiwanese utility Ho Ping Power Co has also attracted attention. The loan pays a margin of 60bps over the secondary CP rate.

BIG BUYERS Taiwanese banks are a strong source of liquidity for Asian loans, and make large commitments to widely syndicated international currency loans. The FSC's discussions could affect Taiwanese banks' appetite to lend to cheaply-priced loans and raise their pricing requirements, which could lead to higher loan pricing across Asia, bankers said. Pricing was increased on a $70 million five-year financing for Taiwanese beverage packing material manufacturer Hon Chuan Enterprise Co Ltd's unit Hon Chuan Holding Ltd on Tuesday by 25bps to 120bps over Libor from 95bps. The deal was launched two weeks ago. Several offshore banking units of Taiwanese banks said that they are raising their pricing requirements on syndicated loans to 200bps from 150bps."We need at least 50bps more in pricing now," one banker said. The FSC was established on 1 July 2004 as the authority responsible for development, supervision, regulation, and examination of financial markets and financial service enterprises in Taiwan, according to its website.