The British Broadcasting Corporation (BBC) has tapped the bond market for the first time in its 90-year history, to raise funds for its commercial arm BBC Worldwide (BBCW).
BBC Commercial Holdings (BBCCH) raised £170m for BBCW through the US private placement market from eight investors, consisting mainly of pension funds and insurance companies. A total of £28m was raised from investors directly in sterling and $216m in US dollars (USD), which BBCCH swapped back into £142m Sterling.
The proceeds will be used to refinance existing debt within the BBC’s commercial business and to fund BBCW and “its investment in content for commercial exploitation”. BBCW sells BBC shows and manages its brands across the globe.
The BBC, which has a £350m limit imposed on its borrowing, raised the seven-year bond deal, with an interest rate of 2.71%, to help diversify its lending sources and secure longer-term funding. The offering was more than five times oversubscribed and achieved a USD interest coupon which market sources believe to be the lowest ever achieved by any UK or European corporate issuer for a seven year issue in the US private placement (USPP) market.
A thriving market
“This is a very buoyant market in our experience,” said BBC group treasurer Stephen Wheatcroft. “It establishes a new source of funding for the business, which sits alongside the bank debt, with a high quality group of investors.”
BBCCH was assisted in the issue by Barclays and Lloyds Bank, which were mandated as joint agents on the transaction. Bankers commented that the BBC’s deal was well-timed, coming just ahead of the sharp back up in US Treasury yields, even though the private placement market is less sensitive than other markets to short term volatility.
A BBC spokesman commented: “This is an excellent deal for BBCCH, which provides a core of longer-term debt at very low cost. In addition, it establishes anew source of funding fro the business, which sits alongside the bank debt, with a high quality group of investors.
“The level of investor demand and final pricing reflects the underlying credit quality and strength of the BBC and its commercial businesses.”
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