US fund KKR’s proposal to buy Telecom Italia has received a letter of commitment from JP Morgan to support the €45bn (£38bn) financing needed for the deal.
JP Morgan said in the letter it was ready to lift its commitment above €45bn if necessary, Italian daily Il Messaggero first reported.
Sources have confirmed confirmed the investment bank’s role in arranging the financing for the bid. It has previously been reported that JP Morgan was advising KKR together with Citi and Morgan Stanley.
In the non-binding proposal submitted to TIM’s board, KKR has set an indicative price of 0.505 euros a share, valuing Italy’s biggest phone group at 10.78 billion euros or 33 billion euros including TIM’s net debt of 22.5 billion.
Il Messaggero said €34bn in the financing package would be used to refinance TIM’s debt under a “change of control” clause, with an additional 11 billion euros representing a cash confirmation required by market regulators to cover the offer’s equity value.
According to sources, the fund’s plan is to carve out the group’s fixed network – of which KKR is an investor since last year – leveraging on the fact that company’s shares are at historic lows.
TIM’s chief executive Luigi Gubitosi was forced to struck a €1.8bn deal with KKR, giving the New-York fund a 37.5 per cent stake in FiberCop, the part of the business that deals with last-mile network.