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Britbox & Brexit

12 September 2019 by jbchevrel

ITV PLC (ITVLN - Baa3 stable /BBB- stable) announced a tender offer for its 2.125% 2022 notes and 2.00% 2023 notes with maximum acceptance amount of €500m (nominal amount of the notes across both series combined). The company reportedly intends to issue a new series of €-denominated FRNs, subject to market conditions. It has mandated Barclays, Citi and Credit Suisse as Joint Lead Managers to arrange a series of FI investor meetings in Europe, starting Sep 16. A senior fixed-rate € 7y transaction should follow, subject to market conditions. Net net, the existing 22s and 23s didn’t really underperform Gilts and £ swaps on the day, broadly stable Z-spread around 85bp for the 22s and around 110bp for the 23s. The CDS are slight ‘tight’ in that respect, with June 2022 around 55bp and June 2023 around 85bp. On the 5y point, the CDS didn’t properly underperform either. It was indeed tighter by -5bp on the day, vs -4.2bp on the broader iTraxx Main s31 index. And the Main s31 fair value is tighter by -2.3bp today. ITVLN is relatively high beta and is the 5th widest name in the benchmark. It notably tended to follow the Brexit risk premium lately, a driver which has not been in focus today and yesterday, but which has helped ITVLN to outperform last 1M, beyong the high-beta pre-roll effects. The ITV stock, however, has more clearly underperformed (-5%) vs a FTSE 100 index broadly flat on the day. Also today Shore Capital lowered its PT on the name and yesterday, BBG reported that the broker Berenberg (‘increasingly bearish’) wrote that ITV’s “uncompelling” Britbox (cooperation ITV-BBC, cost £5.99/month) could face more competition in streaming, after the pricing of Apple’s TV+ service came lower than the consensus had expected. As a mitigant, the same BBG piece reported that Citibank wrote that even if Apple’s U.S. service had been presented, there was limited clarity on what the non-US outlook was and that European players may have more time to adapt to this new competition from AAPL, adding that an international offer may look less adapted to local public, making Apple TV+ offer looking less disruptive on the European SVOD market. Interestingly, the Torygraph yesterday commented a’s post suggesting ITV could well end up being the target of takeover activity if a foreign buyer wants to take advantage of a weak pound. The ‘great british peso’ has indeed reverted higher lately but remains in the low end of the range (context - 1.235 $ and 0.895 per €). It wrote “We think there could now be a rush for other UK-listed companies in the coming weeks – old favourites like ITV and Imperial Brands are among those to watch but there are plenty more besides.” Nothing serious at this point, and this post was following the LSE’s takeover story but M&A could indeed add itself to the equation, especially if Brexit goes sour.