Telecom Italia launches three sets of dollar, euro exchange offers

By Marisa Wong

Los Angeles, April 18 – Telecom Italia Capital is inviting eligible holders of its outstanding notes from four dollar-denominated series to exchange their notes for new notes, according to a press release.

The invitation covers the following outstanding dollar-denominated original notes, listed in order of acceptance priority level:

• $1 billion 6 3/8% guaranteed senior global notes due 2033 (Cusip: US87927VAF58, 87927VAF5, US87927VAC28, 87927VAC2, UST92762AC63, T92762AC6);

• $1 billion 6% guaranteed senior global notes due 2034 (Cusip: US87927VAM00, 87927VAM0);

• $1 billion 7.2% guaranteed senior notes due 2036 (Cusip: US87927VAR96, 87927VAR9);

• $1 billion 7.721% guaranteed senior notes due 2038 (Cusip: US87927VAV09, 87927VAV0).

Euro exchange offers

Each of Telecom Italia SpA and Telecom Italia Finance have launched, concurrently with the launch of the dollar exchange offer, exchange offers in respect of seven series of outstanding euro-denominated notes issued by Telecom Italia SpA and one series of outstanding euro-denominated notes issued by Telecom Italia Finance having a combined aggregate outstanding principal amount of €8,435,000,000 as of April 18, a portion of which can be accepted in connection with the exchange offers.

Details of the euro exchange offers were not disclosed in Thursday’s press release.

Dollar exchange offers

The company is offering to exchange each series of dollar-denominated original notes for an equal aggregate principal amount of new dollar-denominated notes with terms substantially the same as the terms of the corresponding series of original notes, including maturity, interest rate, interest payment dates and restrictive covenants and except for provisions relating to the dollar acquisition exchange (described below) and minimum denomination provisions described in the exchange offer memorandum.

Each series is subject to a minimum series exchange condition of $300 million and a maximum series acceptance amount of $500 million.

The maximum aggregate amount of dollar original notes accepted for exchange in the dollar exchange offers will be capped such that the aggregate amount of dollar new notes issued will not exceed the dollar equivalent of €5 billion less the aggregate principal amount of any euro original notes tendered and accepted in the euro exchange offers.

Accordingly, the aggregate principal amount of dollar original notes accepted as part of the dollar exchange offers will depend on the aggregate principal amount of euro original notes tendered and accepted in the euro exchange offers.

In no event will the dollar maximum acceptance amount exceed $2 billion, unless the company decides to increase any maximum series acceptance amount.

The company said it reserves the right, but is not obligated, to increase the €5 billion total cap or the $500 million maximum series acceptance amount for any series, and ultimately the dollar maximum acceptance amount.

In addition to the $1,000-par exchange consideration, the company is offering an early bird premium of $2.50 per $1,000 principal amount of notes tendered by the early participation deadline.

Acceptance priority

With respect to any series of dollar original notes, all the dollar original notes of that series tendered at or prior to the early participation deadline will be accepted in priority over any dollar original notes of the same series that are tendered after the early deadline.

If the minimum series exchange condition for any series is not reached within that acceptance priority level by the early deadline, no tendered dollar original notes within that acceptance priority level will be accepted, and the issuer will accept, up to the $300 million minimum, dollar original notes within the next sequential acceptance priority level that are tendered by the early deadline, the first waterfall round.

Subject to the dollar maximum acceptance amount described above, any dollar original notes of each series tendered that are not accepted under the first waterfall round will then be accepted sequentially through each acceptance priority level.

In the second waterfall round, if the minimum series exchange condition for such series is reached, no tendered notes within the next sequential acceptance priority level will be accepted until the maximum series acceptance condition for any such higher ranking series is reached.

If the principal amount of any series of dollar original notes tendered at or prior to the early deadline would result in the issuer issuing new dollar notes having an aggregate principal amount in excess of the maximum series acceptance amount for that series, the issuer will not accept any excess dollar original notes tendered for exchange after the early deadline, and proration will apply.

New notes, acquisition exchange

The new dollar notes issued under the dollar exchange offers will either

• Be mandatorily exchanged without the need for further action by the holders for an equal aggregate principal amount of new notes to be issued by Optics BidCo SpA with the same maturity, interest rate and interest payment dates as the corresponding series of dollar new notes, except for the provisions relating to them being secured and some other provisions as described in the exchange offer memorandum, if the acquisition has or will be consummated by the longstop date; or

• Remain outstanding as a separate series not fungible with the corresponding series of dollar original notes not tendered under the dollar exchange offers, if the acquisition and the dollar acquisition exchange (the former scenario) are not completed by the longstop date.

The acquisition refers to Telecom Italia’s previously announced planned sale of its fixed-line network to KKR.

Timetable

The early participation deadline of the dollar exchange offers is expected to be 5 p.m. ET on May 1, which is also the withdrawal deadline.

The date of the early participation deadline is expected to coincide with the expiration time of the euro exchange offers, since the aggregate principal amount of the dollar original notes accepted as part of the dollar exchange offers depends on the aggregate principal amount of euro original notes tendered and accepted.

The dollar offers will expire at 5 p.m. ET on May 16.

Settlement is expected on May 21.

The acquisition longstop date is Oct. 15.

Settlement of the acquisition exchange is expected to be completed on or prior to the longstop date.

BNP Paribas (+33 1 55 77 78 94; liability.management@bnpparibas.com), Credit Agricole CIB (+44 20 7214 5733; Liability.Management.Global@ca-cib.com), Deutsche Bank AG (+44 20 7545 8011), Goldman Sachs International (+44 20 7774 4836; liabilitymanagement.eu@gs.com), J.P. Morgan Securities LLC (866 834-4666) and UniCredit Bank GmbH (+39 02 8862 0581 / +49 89 378 15150; agdccorig.uc@unicredit.eu; corporate.lm@unicredit.de) are the dealer managers for the dollar exchange offers.

Kroll Issuer Services Ltd. (+44 20 7704 0880; attn.: Arlind Bytyqi / Jacek Kusion; tim@is.kroll.com Website: https://deals.is.kroll.com/tim) is exchange and information agent.

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