The new loan was launched last week, following the spin-out of the Irish unit from the merger of Virgin Media UK and O2 last year.
It aimed to maintain the standard five times leverage typical of companies in the Liberty Global empire, raising a €900m eight year loan in ESG format, with proceeds paid up to Liberty Global as a dividend. Virgin Media Ireland’s existing debt was contributed into the O2 joint venture.
Initial talk on the loan was 325bp-350bp at a 99.5-99.75 OID, with an update on Thursday suggesting 350bp will be the final margin, though the OID had not yet been firmed up as GlobalCapital went to press.
Changes on Thursday also tightened the loan terms. The original documentation allowed Virgin Ireland to incur “ratio debt” — one of the available baskets to add more debt to a leveraged company — provided total senior secured net leverage was below 5.5x.
This has been tightened half a turn, and a total net leverage test at 5.5x has been added, constraining the company’s ability to add extra debt on day one before the business has delevered, and its ability to sidestep the secured leverage test by layering in unsecured debt.
Most investor pushback on loan terms has recently focused on margin ratchets, with lenders largely holding the line against borrowers who want big margin cuts for as little as a quarter turn of deleveraging.
Pushback against Liberty Global deals is particularly unusual, with the group — one of the largest borrowers across European leveraged finance — generally using a standard set of documentation.
However, the sheer quantity of Liberty Global-related supply may have worked against Virgin Ireland here, with many leveraged finance investors already owning loans, bonds and receivables notes across the Virgin UK-O2, VodafoneZiggo and UPC credit silos. While Virgin Ireland will be a new, standalone credit silo, investors may still be reluctant to add yet more Liberty Global debt to their portfolios.