Spain’s Ono defies periphery credentials

Grupo Corporativo Ono is not just any high yield issuer. In the last two crisis-ravaged years the Spanish cable operator has been able to attract support from both European and US accounts. Ono’s emphasis on maintaining a good relationship with its bondholders has been key to its success. Stefanie Linhardt reports.

  • 26 Sep 2012
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Grupo Corporativo Ono this year showed that being a high yield issuer from Europe’s periphery does not mean you are automatically barred from the capital markets.

The Spanish cable operator, which has been a high yield issuer since 2000, sold $1.31bn (€1.06bn) of bonds in the first half of 2012 through smart market evaluation, selling bonds to the US rather than the European market.

"Last November, when we announced our third quarter results, we went on a non-deal roadshow for US investors and that helped us immensely when we tapped the US market in January," says Carlos Sagasta Reussi, Ono’s Madrid-based chief financial officer.

"We always felt the US market was a very important one as in US high yield the cable industry had been around and understood for many years compared to the few years in Europe," he adds, noting that his largest holders tend to be US-based.

The US market’s reliability also influenced Ono’s decision to cross the Atlantic.

"It was a strategic decision to go to the US initially because in Europe the high yield market can open and close," Sagasta says. "In the US that is much rarer. Yields go up and down but the market by and large tends to remain open."

After last year’s dire second half in the European high yield primary and secondary markets, Ono was wise to turn its attention to the US. After its debut dollar issue in January 2011 and having kept its investors updated throughout the year, Ono was able to move quickly in January.

Reception was so strong for Ono’s dollar bonds that it raised $1bn of December 2018 notes — over twice the initially planned $400m — with a 9.5% yield through its senior secured bond vehicle Nara Cable Funding. The B1/B+ rated notes are pari passu and have equal voting rights with Ono’s senior bank loans in the event of an enforcement.

Ono’s decision to enter the US market in January paid off and helped the cable operator once again in May, when it sold another $310m of December 2018 notes to yield 12.3%.

At that time, "the European market was almost if not completely shut," reflects Sagasta. Thus the US was again the way to go.

"When making a decision, we are not only looking at the yield we are getting, having converted the issue back to euros," he adds. "But also in which market we can get a guaranteed successful deal done."

Keeping bondholders in the loop

One of Ono’s strengths is the relationship with its bondholders. While some European sub-investment grade companies have been criticised for not providing sufficient information or being cagey and hard to talk to, Ono maintains a "fluent dialogue" with its bondholders, according to Sagasta.

"The dialogue is very viable for us because it tells us where investors are and sometimes they say ‘we are full’ or ‘we can’t touch the periphery’, which really helps us to make a decision," he says.

"Investors recognise the transparency and some of the other steps we had taken like, for example, the ‘one euro, one vote’ clause, and a few of the disclosure issues that we have supported have earned us some respect."

Ono was one of the first European high yield issuers to offer its pari passu senior secured bondholders equal voting rights alongside its lenders in the event of an enforcement.

In January, the company turned to its lenders asking for consent to lift the cap on senior secured bondholders’ voting rights from 30% to 40%, before signing a new €1.4bn loan agreement in May, which allowed for equal voting rights for all its senior secured bondholders and lenders.

"Equal voting rights for bondholders is becoming standard practice," says Sagasta. "We listened to our banks and our bondholders and we have been taking steps in that direction over the last few months. Our bondholders are now a predominant part of the capital structure, so we thought it was the right thing to do."

After Ono’s $1bn and $310m bonds this year and its €1.4bn loan refinancing, the company has no big debt maturities until 2017 when €401m of its term loan ‘A’ will come due. In 2018 €2.227bn will have to be repaid.

"Luckily for us, we completed our refinancing for now but I don’t think it will get any easier for us or other companies," says Sagasta. "God knows when the eurozone crisis is coming to a state of relative calm. We look forward to continuing to work with our investor base by providing the same level of transparency and dialogue we have over the last 2-1/2 years."

Apart from the dollar denominated senior secured bonds, Ono has €1bn of December 2018 notes in euros outstanding, as well as Caa1/B- rated €295m and $225m of 2019 senior subordinated notes issued through Ono Finance Plc II.
  • 26 Sep 2012

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