VNU reworks bond sale by adding €200 mln note

VNU NV, the Dutch owner of Billboard magazine and the Nielsen ratings service, has restructured a planned $1.67 billion bond sale to include a €200 million ($252.6 million) note, said a banker working on the transaction who declined to be named. Subordinated debt has a lower priority in case of liquidation or bankruptcy. The size of a planned subordinated bond due 2016 will be cut to $600 million from $835 million, while the $835 million senior note due 2014 hasn't changed, the banker said. Both securities will be issued in dollars and euros, with the split between the two currencies to be decided. The sale may conclude on July 31, the banker said. Funds raised through the sale will pay for VNU's €7.5 billion acquisition by a group of buyout firms including Boston-based Thomas H. Lee Partners LP and New York-based Kohlberg Kravis Roberts & Co. VNU agreed to the buyout in March. Before the company added the new note to its planned sale, there would have been no debt at the level of VNU, which is the reference entity for current insurance contracts. It appears that the bond issue has been redesigned to include a portion issued directly by VNU so as to remove any doubts in the market about the deliverable obligations beyond the maturity of the 2010 sterling bonds, said Rick Mattila, analyst at Dresdner Kleinwort in London.
The annual cost of insuring €10 million of VNU debt for five years using credit-default swaps rose 60 basis points yeseterday. €60,000, rose to a record 475 basis points, according to HSBC Holdings Plc. The new €200 million securities will be senior discount notes, and will have no coupon for the first five years, the banker said. The company will have the option to buy them back after five years, and the debt will have a final maturity of 10 years. Further details on the security weren't available. Moody's Investors Service last week rated the planned bonds Caa1, seven levels below investment grade, and Standard & Poor's rated them an equivalent CCC+. The outlook at Moody's is stable, indicating a change soon isn't likely. The outlook at S&P is negative. ABN Amro Holding NV, Deutsche Bank AG, Citigroup Inc., ING Groep NV and JPMorgan Chase & Co are managing the sale. (Credit-default swaps are used to bet on a company's creditworthiness or protect against non-payment of its debt. The buyer pays an annual fee and gets the full amount insured if the borrower defaults. In return, the swap seller gets the defaulted loans or bonds. Swap prices rise when creditworthiness worsens, and fall when it improves.) Marc Borkink, director of the VNU treasury department at the company's headquarters in Haarlem, the Netherlands, declined to comment. (Bloomberg)