TIM Hellas plans 500 mln euro PIK note

By Kirsten Donovan

LONDON (Reuters) - The private equity owners of Greek mobile phone network operator TIM Hellas will sell a 500 million euro ($611.5 million) PIK note this week, using the proceeds to pay themselves a dividend, a banking source familiar with the situation said.

Adrian Beecroft, chief investment officer at Apax Partners, which bought TIM Hellas together with Texas Pacific Group last year, said on Tuesday that the pay-in-kind note issue was motivated by stronger earnings before interest, tax depreciation and amortization (EBITDA) at the group.

EBITDA at TIM Hellas has improved since the purchase and been boosted by the addition of Q-Telecom, Beecroft told the Reuters hedge fund and private equity summit in London. As a result, the leverage multiples associated with the additional debt are no higher than at the time of the original acquisition, he added.

"It's the company changing, rather than the debt market (appetite)," Beecroft said.

Payment in kind notes became popular last year as a way for private equity sponsors to pull cash out of companies they had bought, but the flow of deals dried up after the credit markets were shaken by a huge profit warning from mammoth borrower General Motors (GM.N: Quote, Profile, Research, Stock Buzz) and its subsequent downgrade to "junk" status.

They are structured such that interest accrues throughout the life of the note and is only paid in cash when the note is redeemed.

TERMS

The senior secured payment-in-kind note has a 2014 maturity. It will be priced at par and pay a coupon of three-month Euribor plus 825 basis points, the source told Reuters LPC on Tuesday.  Continued...