Belgacom case study

4 May, 2013
Investment Banking

Benchmark Bond Offering Case
Belgacom The Inaugural Institutional
Benchmark Bond Offering
Alizée Hardy
Orea Lika
Rossella Miccolis
Yasmine Nouri
Margaux Vandenbossche
For Lecturer Yassine Boudghene
Assistant Quentin Bodart

Case context
§ In 2006 Belgacom acquisition of the remaining 25% stake in Proximus that Vodafone owned.
§ Consideration was EUR 2bn
§ Financed by cash and EUR 1.8bn “1y bridge loan facility” § The debt is taken out by issuing bond
§ First bond offering on the primary market

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What is a “bridge loan”? (Question #1)
“A way of financing in the short term (up to one year) until a person or company secures permanent financing.”

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Higher interest rate
Backed by some form of collateral
Contracted in a smaller period of time
Relatively less administration work

Reasons for short term financing needs
(Question #1)
§ Belgacom wanted to take advantage of a short-term opportunity in order to secure long-term financing.
§ Belgacom wanted to buy in cash the remaining stake owned by
Vodafone for EUR 1.8 bn.
§ The objective was to raise capital by issuing new bonds on the corporate bond market.
§ However, bond issue takes time and the cash was needed quickly to lock-in the deal.

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Rationale of a bridge loan for financing the acquisition (Question #1)

Ø “Bridge the gap” between the acquisition of the remaining stake and the issuance of the bonds.

Ø Gave Belgacom the “luxury” to wait in order to lock in the best pricing conditions in the bond market.

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Alternative financing sources (Question #1)
§ Letter of comfort:
“A document prepared by an accounting firm assuring the financial soundness of a company.”

+ Allows to put the deal on “hold” until Belgacom issued the bond and raise the capital necessary to close the deal.

- Losing the deal or poor market conditions.

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Alternative financing sources