Virgin Media has completed a major three year refinancing programme that has fundamentally changed the capital structure of its business, providing greater flexibility and scope for the use of any surplus future cash flow.
Over the past three years, Virgin Media has worked with its lenders to significantly change its debt mix from predominantly near-term bank debt, to predominantly longer-term bond debt at attractive financing costs. During this period the company has issued US$1bn of convertible notes, £1.7bn of senior unsecured notes and £1.5bn of senior secured notes. It also successfully amended its senior credit facilities in October 2008 and again in October 2009 to improve repayment options and flexibility and today closed a new £1.9bn bank facility.
In January 2007, the company had debt repayments of £4.8bn due within five years, to the end of 2012. Today that figure has been reduced to £325m before 2013, with no single payment over £200m due in any year until 2015 and the average maturity now up to 6.8 years. This has been achieved in conjunction with reducing the weighted average cost of debt to around 7.5%.
Once £178m of senior notes due 2014 are redeemed next month, Virgin Media will have repaid approximately £815m during this period using the cash flow generated by the business.
Together with significant operational and financial improvements, this enhanced debt maturity profile has resulted in a capital structure that will allow Virgin Media greater focus on its operational plans and flexibility around the future use of cash flow, as well as driving top-line growth.
Eamonn O’Hare, Virgin Media’s chief financial officer (CFO), said: “Our focus has been to steer the business into a position where we have a long-term, fit-for-purpose capital structure that supports our ambitions. The completion of this process is a major achievement, particularly in light of the market conditions over much of the last three years. In order to overcome those issues in the credit markets, we have been innovative and proactive in our efforts to substantially reduce our refinancing risk.
“Looking ahead, we are a highly cash generative business. Through our combined efforts to increase the efficiency of the organisation, we anticipate continuing the good progress we have made. The sustained financial stability of our business underpins all of our commercial efforts and will contribute to our continued leadership position in the superfast broadband and next generation TV markets.”
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