UPC gets Liberty loan

May 29, 2001
Web Posted at 0813 GMT

By Jana Sanchez

AMSTERDAM, (Reuters) - Cable network operator United Pan-Europe Communications (UPC) secured crucial financing on Tuesday, announcing it had received a one billion euro exchangeable loan from Liberty Media.

The deal, struck at eight euros per share, replaces an earlier agreement in which UPC would have received the same amount through a rights issue, due to renegotiation of a takeover deal by Liberty and UPC parent UnitedGlobalCom.

UPC shares rallied on the news, gaining 4.9 percent to 6.85 euros at 0748 GMT, and initial reaction from analysts was positive.

"Overall, the market will be reassured. It will be more expensive financing, and UPC will still have a one billion euro funding gap, but it is reassuring that UPC got the one billion euros it needed," said one analyst who declined to be named.

UPC had net debt of 7.2 billion euros at the end of the first quarter and the loan, until converted, will add to that.

It will be treated as debt by credit rating agencies and by the Euronext bourse for determining shareholder equity level.

But analysts said the market looks favourably on convertible loans as they are issued by companies which want equity in the borrower.

They are considered safer than equity for the investor, as bond holders have priority over other creditors and over equity holders in the event of business failure.

COULD BE MORE TO COME UPC said it expected to receive the proceeds from the placement on Tuesday.

The company said it would use the cash to pay higher-interest bearing loans and it would continue to evaluate the market for raising additional equity, either through a rights offering or other public or private market transactions.

Under some conditions, Liberty could pay up to 15 euros per UPC share. Those conditions include UPC raising additional cash at a higher price and/or UPC's share price strengthening.

The exchangeable loan is expected to be transferred to UnitedGlobalCom, UPC said in a statement.

The six percent coupon payable in kind with six-year maturity is callable at anytime in the first year at 100 percent plus accrued interest.

In a separate statement Liberty said it would inject $1.4 billion into UnitedGlobalCom in cash and assets, replacing a similar plan announced on February 23.

After the completion of the new Liberty/UGC deal, Liberty will own between 44 and 51 percent of the New United.