A $41 Billion Fund Says TDC Buyout Won't Involve Splitting It Up

(Bloomberg) -- One of the funds behind a takeover bid for TDC A/S says there’s no interest in splitting up the business. It also tried to remind creditors that the consortium’s offer is backed by a cash-heavy group of long-term investors that can support the Danish phone company’s balance sheet.

“Our plans do include very large investments, but we want a well-balanced debt structure, that’s how we always work,” said Peter Damgaard Jensen, the chief executive of PKA, a Danish pension fund that manages about 250 billion kroner ($41 billion) in assets.

TDC Bonds, CDS Price In the Bullish End of Ratings Expectations

A $41 Billion Fund Says TDC Buyout Won't Involve Splitting It Up

PKA, together with ATP, PFA and Macquarie Infrastructure and Real Assets, wants to buy TDC for 50.25 kroner a share. The company was trading just above 49 kroner on Wednesday, valuing it at 40 billion kroner, or $6.6 billion. Though equity investors appear to have welcomed to the offer, creditors have been a bit more skeptical. TDC bonds were initially sold off after the consortium’s proposal was announced.

Macquarie, which would hold about half of TDC if a takeover goes through, has said it has no plans to add debt to the Danish company. Damgaard Jensen at PKA says the consortium has “the solidity that’s needed” to support TDC’s credit profile.

TDC Deal Financing Won’t Add to Debt Load, Macquarie Says

TDC currently has the equivalent of about 3.1 billion euros ($3.8 billion) of debt outstanding. The company carries the lowest investment-grade ratings at Moody’s Investors Service, S&P Global Ratings and Fitch Ratings. Both Moody’s and S&P have put their ratings on review since the buyout was announced.

TDC May Be Cut to Junk by Fitch on Takeover Offer

“It’s too soon to talk about TDC’s future credit ratings,” the PKA CEO said. “As a starting point, it’s worth noting that the members of the consortium do have a lot of financial means.”

Damgaard Jensen says splitting TDC up is “not on our plans currently. What we plan is to put more focus on the infrastructure part and also put more management focus on that part of the business.”

PKA and the other funds want to treat TDC as an infrastructure investment, he says. “The infrastructure part is very important. We will also try to get as much out of the rest of TDC. But for us as a pension fund it’s especially the infrastructure that has a great interest.”

The New Infrastructure

It’s worth noting that the industry may be stretching its definition of infrastructure. Mikko Mursula, the chief investment officer of Ilmarinen Mutual Pension Insurance Co. (one of Finland’s biggest pension funds) says this “widening” of the definition is an effort to address the huge demand among funds for infrastructure, amid a “lack of interesting pure, traditional infrastructure opportunities.”

“It would be interesting to learn whether this makes a difference from the perspective of rating agencies, if this is defined as an infrastructure investment instead of an LBO,” he said in an interview.

©2018 Bloomberg L.P.