Junk bonds to the rescue

2 July 2003

Back in November, the conglomerate bought a big chunk of telecoms firm Cegetel. But all the cash flow benefit flowed to its banks. Now that Vivendi is refinancing the deal Cegetel’s dividends will actually do it some good. It has neatly exploited the bond market boom.

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Vivendi Universal was pricing a E1.1bn 5year high yield bond on Wednesday. The new debt will refinance the remaining balance of a E1.3bn bank facility the conglomerate raised in November to help it acquire a 26% stake in telecoms operator Cegetel. In the process, Vivendi will be scrapping a specialpurpose company, SIT, through which it held the stake, so that it holds all of its 70% interest in Cegetel directly. Market sources quoted by Dow Jones were expecting the bond to yield between 6% and 6.5%, compared to the 400 basis point margin over euribor it pays on the bank facility. The issue, which has been rated B+, is being lead managed by Goldman Sachs.

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