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One Up, One Down

17 July 2018 by lberuti

It was a fairly busy day in terms of idiosyncratic news, particularly in Europe, but the TMT sector was front and centre. TLSNSS ( TeliaSnoera AB ) has announced that it will buy TDCDC’s ( TDC A/S ) Norwegian activities for NOK21Bln. The company will not tap the bond market even though the dividend policy, the share buy-back plan, and the potential acquisition of Bonnier Broadcasting are unaffected. The transaction will be financed fully with cash-at-hand and is expected to push the net debt/EBITDA ratio to 1.9x. As far as TDCDC’s investors are concerned, the sale is nothing unexpected. It probably happened earlier than they expected though. It is largely assumed that the proceeds will be used to repay debt as the company manages its debt pile and rating, and some bonds should be redeemed. The news put a bit of pressure on TLSNSS’s 5-year risk premium which was the only name wider (+3bps at 45bps) in an otherwise positive session for risk. It also sent TDCDC’s 5-year CDS 19bps wider at 220bps, making it by far the best performer of the sector.