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Opinion

BT's potential bumper securitization: Hoist by their own petard

If, as expected, BT uses a bumper securitization to protect itself against LBO predators it might start to give other potential targets ideas.

They say that imitation is the sincerest form of flattery, but there are (admittedly few) circumstances in which investment bankers do not like to be flattered. One such circumstance is when corporates take some of their best ideas and use them to devise financing strategies of their own.

UK telecoms operator BT Group looks as if it might be doing just that. In announcing the second-quarter results last month, BT chairman Christopher Bland let slip that the firm was looking at opportunities both to increase debt capacity and lower the cost of its debt. And for a firm with steady, utility-like cashflows such as BT’s it doesn’t take a rocket scientist to figure out the likely plan: a securitization. A securitization would certainly achieve aims one and two but it could also achieve a third one – that of blocking a potential hostile bid from a private equity or infrastructure fund buyer.

The appetite among financial buyers for large businesses with steady, regulated cashflow is now unprecedented (see Behind infrastructure’s gold rush, December 2006). Not surprisingly, given its scope and scale, BT is persistently a potential target. And in the wake of the kind of feeding frenzy that has surrounded BAA and Thames Water recently, that is certainly not going to change.

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