Bank of China contributes to €4 billion EUR term loan A tranche of a €6.6 billion EUR syndicated loan to facilitate the merger of Orange España and MASMOVIL Ibercom (Linked to Record ID#103514)

Project narrative

On July 23, 2022, Orange Espagne S.A.U. (OSP; Orange España), a Spain-incorporated telecommunications company and subsidiary of French telecommunications operator Orange S.A., and MASMOVIL Ibercom S.A.U. — a Spanish telecommunications operator and subsidiary of England and Wales-incorporated Lorca JVCo Limited — signed an agreement to merge their businesses in Spain via creation of a 50:50 joint venture between Orange España and MASMOVIL Ibercom, a deal with an enterprise value of €18.6 billion EUR (€7.8 billion EUR for Orange, and €10.9 billion EUR for MASMOVIL). The merger was expected to be completed in the second half of 2023, with the two companies operating independently until completion. To support this deal, in or around July 23, 2022, a syndicate of banks — including Bank of America Corporation, BNP Paribas S.A., and Banco Santander S.A. as arrangers — entered into a €6.6 billion EUR syndicated non-recourse debt package with an unspecified borrower(s) to facilitate the Orange-MASMOVIL merger. This debt package included a €4 billion EUR term loan A tranche, a €2 billion EUR term loan B tranche, and a €600 million EUR unfunded capital expenditure facility. The proceeds were to facilitate the merger, namely by financing a €5.85 billion EUR payment up-streamed to the Orange and MASMOVIL shareholders. Normally, such debt would be sold down to institutional investors by the arrangers. The market conditions of 2022, impacted by an energy crisis, inflation, and the rick of recession, meant that banks struggled to sell debt, and held more junk debt and exposure to deals; investors required higher discounts and in general were more reluctant to purchase non-investment grade debt. The arrangers of the €6.6 billion EUR loan, meanwhile, tried hard to limit their exposure. In September 2022, the arrangers entered into negotiations with other lenders to sell off portions of the €6.6 billion EUR debt; in the final days of December 2022, a "handful" of new lenders — including the Bank of China (BOC) and the Industrial and Commercial Bank of China (BOC) were finalizing a deal to purchase €600 million EUR ($631 million USD) of the €4 billion EUR term loan A tranche. BOC and ICBC successfully joined the syndicate, becoming lenders. Record ID#103513 captures BOC's contribution. Record ID#103514 captures ICBC's contribution. The merger was completed on March 26, 2024, with the 50:50 joint venture, MásOrange, beginning operations that day, forming a telecommunications provider with 37 million broadband and mobile lines in Spain.