The group’s existing secured debt consists of a £330m RCF maturing on 30 November 2024 and £685m 3.875% SSNs due on 20 February 2025. The group also has a £424.9m HoldCo PIK facility, which sits outside the restricted group.

The restructuring deal involves £650m of new 1L debt, which will consist of a PIK loan and a PIK Toggle SSN, both with 4% margins (over Sonia for the loan and over swaps for the bond) and maturities on 1 September 2027. The PIK options under the loan and bond is only for the first year.

The remaining existing outstanding debt will be retranched into 2L debt, consisting of a loan and notes, both with 7.5% margin (over Sonia for the loan and over swaps for the bond) and maturities on 1 March 2028. Both facilities interests are PIYC, which means they will be capitalised at the end of each interest period if the group does not have sufficient cash to pay them.

There will also be a new 2L facility to refinance a bridge financing provided by certain lenders and any accrued and unpaid interest as at the restructuring effective date. All senior secured creditors will be able to participate on a pro rata basis to their existing holdings. This new facility is fully underwritten by the bridge facility lenders in exchange for a 3% backstop fee. This facility will rank pari passu with the other second lien debt.

The group would also like to extend its existing PIK facility to 1 April 2028 as part of the restructuring.

The group announced last month that its shareholders have agreed to provide a £170m facility upon execution of binding lock-up agreements between the parties.

On Monday (2 September) the group said its major shareholders have provided the company with £235m. Of the total, £170m was provided over the weekend and £65m last month. The shareholders and Ares have also agreed to contribute assets into the group, including Virtual1 and the Ovo and Shell customer bases.

As at 29 February 2024, the group had £1.9bn of debt and £92m of cash with 7.1x leverage, according to its FY 24 report.

Existing bondholders include Schroders, Sona Capital, Capital Four and Cheyne Capital, the sources told 9fin. The bondholders are being advised by Milbank and Perella Weinberg Partners, as reported.

The RCF lenders are being advised by PwC and A&O Shearman, the sources said. The RCF lenders include Bank of Ireland, Barclays, Clydesdale Bank, DNB, HSBC, ING, Mitsubishi UFJ Financial Group, and NatWest, according to reports.

The company is being advised by Rothschild and Freshfields, according to today’s announcement. Ares is being advised by Weil, Gotshal & Manges and PJT, the sources said.

The consenting shareholders are being advised by Simpson Thacher & Bartlett, the sources said.

Supportive talks

Support for the group’s refinancing plan has climbed to 70% of its secured debt holders, the company said in an announcement on Monday (2 September). This is up from 60% when it announced the terms of the deal last month (on 12 August).

Ares, which provided a PIK facility to the group, the group’s major shareholder Toscafund and its founder Sir Charles Dunstone have also signed the lock-up agreement.

According to the 2025 SSN OM, the group requires 90% consent to extend the maturity of the notes. The deadline to accede to the lock up is on 13 September. The group is hosting a call for SSN holders on Tuesday (3 September) at 9:30 am BST.

Since the refinancing update last month, the 2025 SSNs are quoted 9.25 points higher at 75.5, according to 9fin’s data.

Sales Talk

The company said the proposed transaction will leave it well-funded to deliver its strategic plans for PlatformX Communications (PXC) and TalkTalk Consumer.

The transaction gives it liquidity to tide it over given the delay in its planned sale of an equity stake in PXC. Reports touted Macquarie Group as the potential buyer.

Following the sale of the TalkTalk business direct entity, TalkTalk has separated the remaining wholesale and consumer entities into two distinct units with separate leadership teams: PXC and TalkTalk Consumer. The business direct entity was sold to its main shareholders for £95m through a special purpose vehicle (SPAC).

The group also announced last month that its CFO James Smith will become Group CEO and CEO of PXC, with Tom O’Hagan stepping up to a new role of executive chairman of PXC. Susie Buckridge will remain as CEO of TalkTalk. Dunstone will continue in his role as Group Chairman.

Toscafund took over 98% of the shares in TalkTalk in 2021 for £1.1bn, of which £575m was provided by Ares. According to a TalkTalk presentation the PIK facility was initially £275m in 2021 and was provided by Ares.

Last September KKR provided the company with a £75m loan in September, which matures in 2026. Supply chain finance platform Demica advised TalkTalk on that transaction.

Ares did not wish to comment. The company did not respond for comment in time for publication.

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