Telefonica puts LatAm IPO on hold
Carrier's debt position is easing somewhat and it no longer feels under such pressure to raise new funds
Published: 11 February, 2013
Telefonica has put plans for an IPO of its Latin American business on hold, according to reports, and the Spanish group does not plan to resurrect the plan unless it sees strong investor interest, or it comes under increased pressure from credit ratings firms.
According to sources who spoke to Bloomberg, that pressure on Telefonica has eased a little in recent months, making it less urgent to raise funds via unit sales or IPOs. It did take that route last October in Germany, where it listed a 23% stake in its O2 subsidiary there, raising almost €1.45bn to help reduce debt and bolster the credit rating, amid the ongoing economic problems in its southern European home region.
In recent months, Telefonica has also suspended its dividend and raised €1.5bn though issuing 10-year bonds, but the Latin America plan, first considered last May, would have been the biggest, and most complex of the fundraising options available to it. Analysts thought it could have raised about €6bn, though the project had not reached an advanced stage - no banks had yet been hired.
The markets generally welcomed the move. Paul Marsch of Berenberg Bank told Bloomberg: "You could argue having to IPO one their best assets at a low point in valuation is a sign of desperation and not the best thing to be doing for shareholders."
The Spanish group would not comment and has always seemed publicly reluctant to rush into an IPO, despite a successful flotation in Germany. "We do not need to do that transaction, but we may decide to do it depending on what provides the best value for our shareholders," CFO Angel Vila told an analyst meeting in November.
The operator's recent drastic cost-cutting programs do seem to be easing its pain somewhat. Its net debt fell to €52.8bn in November from €58.3bn five months earlier, leading analysts to take a kinder view than they were in early 2012. The telco's long term debt is rated at the second lowest grade by two of the influential ratings agencies, Moody's and Standard & Poor's, and at BBB+ by Fitch (three steps above junk). But the company's stock has fallen by 24% over the past year, reducing its value to €45.3bn or less than its debt.