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Gone With Wind Tre

18 October 2017 by lberuti

The much-awaited refinancing of Wind is finally under way. The company began today the marketing of a jumbo transaction. Bonds issued will amount to €7.3Bln split between 5 different tranches consisting of USD and Euro notes, with maturities ranging from 5 to 8 years. It will be the biggest junk-bond sale by a European borrower since Numericable Group and Altice SA sold the equivalent of more than €10Bln in April 2014. The company should use the proceeds to repurchase existing outstanding notes. The operation will help Italy’s largest mobile-phone company to cut its debt expenses as borrowing costs are near record lows. Even though the deal is expected to be well received - Wind is a well-known name, and there will be demand by investors to replace their existing bonds holdings -, given the sheer size of the deal, you would expect some kind of pressure on Wind’s 5-year CDS. But there was a catch. The new debt will come out of Wind Tre Spa, and not WINDIM (Wind Acquisition Finance SA). There will be a guarantee, but market participants are of the opinion that the language does not satisfy the unconditionality and irrevocability that would make the new bonds deliverable into existing WINDIM CDS. WINDIM could therefore join the cohort of orphaned names referencing empty boxes. Its risk premium collapsed and finished the session 52bps tighter at 94bps.