DT woos investors with positive credit story

At the roadshow for its forthcoming jumbo offering, Deutsche Telekom (DT) yesterday (Tuesday) capitalised on the positive tone surrounding its credit by reassuring investors of its commitment to debt reduction.

  • 22 Jun 2001
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DT officials said the company intended to reduce its debt from Eu69bn to Eu50bn by the end of 2002 through the sale of property and cable assets and a partial flotation of cellphone division T-Mobile.

Last week, DT announced that it had agreed to divest six cable companies to Liberty Media Corp. Analysts expect the deal, which should be closed by the end of July, to raise up to Eu5bn in cash.

A flotation of 10%-15% of T-Mobile, which is valued at an estimated Eu65bn, could raise a further Eu10bn and analysts are confident DT will maintain its single-A status.

"DT should have no problem raising the remainder of its target within the specified time frame," said one analyst. "While the company's A3/A- ratings are both on negative outlook, we do not expect it to slip into the triple-B category."

Standard & Poor's (S&P) had placed the rating on CreditWatch in February, according to an agency report, "partly because of concerns that the firm would not pursue a partial IPO of T-Mobile, unless the likely valuation of these cellular assets improved substantially". Since then, DT had not made any firmer announcements regarding the possible IPO, so analysts were surprised when a fortnight ago S&P removed DT's rating from CreditWatch with negative implications and placed it on review for downgrade. In the event of a downgrade, the German telco would have been facing extra interest payments on around $14.9bn of paper.

The market took further comfort in the news that DT and British Telecom have agreed to share UMTS network costs in Germany. The positive sentiment towards the DT credit should help to tighten spreads on its forthcoming offering.

The Eu5bn-Eu8bn transaction, which should comprise five and 10 year paper, will attract keen demand as it is the last scheduled jumbo supply in the European telecoms sector this year. As the financing requirements of incumbents are now almost nil, analysts say the only other issuance before the year end will be opportunistic. The deal is still expected to incorporate step-up language.

Yesterday, BT 2006 euro paper was trading at 106bp over mid-swaps, while France Télécom 2010 euros were at around 108bp. Telefónica 2005s were at 55bp over mid-swaps. KPN 2006s were wider at 230bp, after the Dutch telco quashed speculation of a rights issue that, it had been hoped, would help trim its debt burden.

While DT has understandably cited recent positive news to support its credit during the roadshow, investors are likely to remain sceptical until the IPO of T-Mobile becomes a reality.

  • 22 Jun 2001

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 17 Oct 2016
1 JPMorgan 310,048.18 1328 8.75%
2 Citi 285,934.48 1059 8.07%
3 Barclays 258,057.88 833 7.29%
4 Bank of America Merrill Lynch 248,459.06 911 7.01%
5 HSBC 218,245.86 884 6.16%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 18 Oct 2016
1 JPMorgan 29,669.98 55 6.95%
2 UniCredit 28,692.62 136 6.73%
3 BNP Paribas 28,431.90 139 6.66%
4 HSBC 22,935.49 112 5.38%
5 ING 18,645.88 118 4.37%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 18 Oct 2016
1 JPMorgan 14,593.71 79 10.38%
2 Goldman Sachs 11,713.19 63 8.33%
3 Morgan Stanley 9,435.23 48 6.71%
4 Bank of America Merrill Lynch 9,019.27 40 6.41%
5 UBS 8,763.73 42 6.23%