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Telefonica to refinance US5bn debts

Friday, January 24 14:55:23

Spain's Telefonica is in talks to refinance about 5 billion euros ($6.8 billion) of debt maturing in 2015, sources said today, a move that would boost its financial muscle ahead of possible acquisitions, particularly in Brazil.

One of Europe's most heavily indebted telecoms operators is negotiating with creditors to lower the cost and extend the maturity of a 3 billion euro loan, three sources with direct knowledge of the deal said, confirming a report in Spanish business daily Expansion.

It is also studying paying off up to another 2 billion euros of debt with proceeds from the sale of its Czech business.

The sources could not confirm, however, that the debt would be refinanced at a price of 85 basis points above the Euribor rate from 110 basis points currently, as Expansion wrote.

A source close to the matter said the pricing of the new syndicated loan, which could take weeks to be agreed, would likely not be so favourable for Telefonica.

Telefonica declined to comment.

The Spanish group sold a series of assets in 2012 and 2013 aimed at reducing debt and improving credit ratings which Moody's have at Baa2, two notches above junk.

Its debt at the end of September was 46.1 billion euros, meeting a year-end target to get it below 47 billion euros three months ahead of time, and its leverage ratio - debt to operating income - was 2.3 times, also below a goal of 2.35.