Telefónica may restructure to reduce €57 billion in debt

Telefónica is considering restructuring its entire Latin America (LatAm) business to raise cash and reduce its €57 billion in debt.

According to Bloomberg, the company may create a regional holding company consisting of its LatAm assets, excluding Telefónica Brazil, and then float this company on the U.S. stock market. A second option, claim people close to the discussions, is to incorporate all Telefónica's LatAm businesses into the Brazilian unit and offer a secondary share sale.

Commenting on the likelihood of this move, Henri Alexaline, a fixed-income investor at London-based FM Capital Partners, told Bloomberg: "Debt overhang currently drives the company's strategy and management's reaction to market pressure has been to monetize its best assets. There would be appetite for a spin-off as Latin America will see some robust growth, but how willing is Alierta [Telefónica's CEO] to abandon his most promising footprint?"

However, insiders believe that the company will initially focus on the IPO of its Telefónica O2 Germany subsidiary, where it hopes to raise €2 billion from offering a 20 per cent share.

Any IPO of the company's LatAm operation is likely to be pushed into next year due to regulatory issues. Bernstein analysts Robin Bienenstock and John Keith have estimated that Telefónica's LatAm business, excluding the "unattractive" Argentina and Venezuela units, is worth €47 billion.

Separately, Telefónica said it was studying offers for its call centre business Atento, having failed to float the unit last year, according to Reuters.

The company filed a note with the Spanish stock market regulator CNMV, stating: "Telefónica will go ahead with the divestment of its stake in Atento, having received a number of offers from third parties, whose terms and conditions are being analysed by the company."

It would seem that Atento could be sold within days valuing its majority stake at €750 to €850 million, significantly below the amount it was seeking last year.

For more:
- see this Bloomberg article
- see this Reuters article

Related Articles:
Telefónica Digital unveils new strategy, partners with Facebook and Google
Telefónica faces spike in debt costs as Spanish crisis worsens
Telefónica primes O2 Germany for IPO as debts climb
Telefónica Europe revenues hit by Euro-zone crisis
Telefónica drops separate Spanish unit in bid for growth

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