Odeon bond issue paves way for sale

ODEON & UCI has completed a £500m bond issuance that could make it easier for Terra Firma, the private equity firm founded by Guy Hands, to sell the cinema chain.

The deal, led by Bank of America/Merrill Lynch and Goldman Sachs, is the first ever high-yield bond issuance for Europe’s cinema industry and has an unusual provision enabling Odeon to avoid paying the usual compensation charge to investors should its ownership change in the next six months.

A source close to the deal said that the six-month timeline was the maximum that investors would accept while giving Terra Firma breathing space to continue negotiations with its current potential bidders, which are BC Partners and Omers Private Equity.

The financing makes Odeon & UCI a more appealing prospect because it enables the group to pursue its strategy of buying up and consolidating cinemas across Europe.

It could help to raise potential bids towards Terra Firma’s high £1.2bn asking price, which had been greeted with scepticism in some quarters. Alternatively, it could enable Guy Hands to avoid a sale in the near future.

The deal consisted of €200m (£174m) in floating-rate euro notes, bought by current and new investors and £300m in fixed-rate sterling notes, which a source close to the deal said were bought by “a broad mix of blue-chip high-yield investors”.

BANK of America/Merrill Lynch (BoA/ML) and Goldman Sachs were joint global coordinators and book-runners on the first ever high-yield bond issuance for Europe’s cinema industry.

The BoA/ML side of the deal was led by Noah Bulkin, a managing director in M&A, and David Melvin, a managing director in financial sponsors. The refinancing part was also led by David Ross, head of leveraged finance for Europe, the Middle East and Africa.
Noah Bulkin advised EDF on its 2008 takeover of British Energy Group and advised Rank, the gambling group, on its sale of Hard Rock Entertainment to the Seminole Tribe. Bulkin has also advised Infinis, which is backed by Terra Firma, on its bid for Novera.

David Melvin advised Gala on its bid for Coral in 2005 and Gondola on its bid from Paternoster in 2006.

Goldman Sachs is also an adviser to Rank Group, which is a former owner of Odeon.