Canary in the coalmine?

5 April 2006 By Taron Wade

Tim Hellas is planning the first "Payinkind" bond issue since the downgrades of Ford and GM last year. The Greek mobile operator is betting investors are hungry again for these highly subordinated bonds. If it’s right, that’s a worrying sign.

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Tim Hellas, the Greek mobile phone operator, plans to sell a E500m Payinkind (Pik) bond. This is the first bond of its type since the wave of Piks issued during the first three months of 2005 before General Motor's surprise profit warning.

Pik bonds pay interest not in cash but in the form of new bonds. The entire amount is repaid at maturity.

The issue will repay a E120m Pik loan with the remainder being paid out to shareholders. Apax Partners and Texas Pacific Group bought an 81% stake in Tim Hellas in June 2005. Deutsche Bank, Goldman Sachs and JP Morgan are running the bond offering.

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