Swiss cable operator Cablecom refinanced all its bank debt with a CHF 1.275 billion ($1.06 billion) senior secured notes offering. "This is the first time a company that is performing well has refinanced bank debt with high-yield; typically that happens when a company is doing poorly and the bank wants out," said an official at Deutsche Bank, one of the underwriters. Goldman Sachs and Credit Suisse First Boston also underwrote the deal.
"The Cablecom deal appeals to long-only investors who want a bank-debt-like asset but cannot buy loans," observed one high-yield manager in London who did not participate in the deal because of the low yield. "4 1/2% yield--where does that get us?" he asked.
Most high-yield deals in Europe have recently been pay-in-kind. But the market volatility brought on by General Motor Corp.'s earning warnings and an interest rate rise in the U.S. led to demand for this deal. "This is the lowest risk deal we've seen this year from a structural perspective," said one London-based portfolio manager. "It's at the top of the capital structure for a change, right the other end of the spectrum from the PIK notes we've been seeing so much of lately." Of the 30 or so high-yield deals that have been completed in Europe year-to-date, about a quarter have been PIKs.