A unique deal from German telecommunications company Tenovis has been drawing attention in the European market recently for its ability to encompass characteristics of several different types of transactions.

"This deal, Tenovis Finance Limited, is a mixture between a secured corporate bond, a whole-business securitization, as well as having elements of a receivables-securitization transaction," said Marie-Jeanne Kerschkamp, vice president and senior analyst at Moody's Investors Service.

Most importantly, the offering makes use of a secured-loan structure in a public deal for the first time under German law. By employing a true-loan structure, the security remained with Tenovis, and as there was no true sale of receivables, no trade-tax issues arose.

The transaction launched EURO300 million worth of notes; the proceeds of the notes are then used to make a loan to the borrower under the Loan Facility Agreement (LFA). The proceeds of this were issued by the borrower Tenovis GmbH & Co. to repay certain existing indebtedness and to refinance existing debt and acquisitions.

The deal priced on Nov. 2 as follows: A single EURO300 million tranche rated A2/A+ at three-month Euribor + 150 basis points (WAL 4.5 years). The step-up coupon which kicks in is priced at E+375 basis points.

The collateral consists of: Existing and future lease receivables arising under the operating lease contracts; Pool I-PABX systems associated with these specific contracts 53,591 outstanding contracts to 43,117 corporate customers in Germany with a total aggregate future receivables value of about EURO1.40 billion or EURO1.15 billion on a present-value basis. M , and; Additional PABX systems (pool II).

"The deal depends on the borrower, as all payments under the secured-loan between the borrower and the issuer are structured as a general corporate obligation of the borrower," Kerschkamp explained. "In a trigger 1 event, the borrower becomes restricted in its activities, similar to what is seen in U.K. whole-business securitizations. However, in the case of insolvency of the borrower, the deal becomes closer to an asset securitization, as the borrower is locked out and the portfolio is serviced by the back-up servicer."

The back-up servicer is EDS Germany. It has also entered into a call option agreement, under which it has the right to acquire all shares in or assets of Tenovis Service at fair market value.

In case EDS does not wish to acquire the business, the three-months availability to find another purchaser is not deemed to be sufficient by Moody's. However, this is mitigated by the commitment which the back-up servicer and the U.S. parent, investment company and private-equity firm Kohlberg Kravis Roberts & Co., have made in the transaction.

As Kerschkamp at Moody's underlined, "Ultimately, one of the features that made this deal possible is the robustness of the contracted cashflows, which gives a highly leveraged company effectively the possibility of raising money at an A2 rating level."

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