Telxius IPO: investors flag concerns about yieldco structure – sources

23 Sep 2016 – Some potential investors in Telxius, Telefonica’s [BME:TEF] telecoms infrastructure vehicle, are concerned its business model is similar to a yieldco, said a buysider, a source familiar with the situation and a banker following the issue.

Telefonica has only folded some of its telecoms towers into the new unit, said the buysider, adding that the company expects to sell more towers to Telxius in the future, particularly in Latin America. The unit has the capacity to add a lot of debt to its balance sheet, the buysider said, adding that there is no clarity on the price.

In the IPO prospectus, Telxius has confirmed that it could buy more towers from Telefonica in the future. The company closed June with net financial debt of EUR 602m, giving it a leverage ratio of 1.86x. It plans to maintain its net debt/OIBDA ratio below 4x, it said.

Telxius’ IPO bookbuild is underway, with a price range of EUR 12-EUR 15. It closes on Thursday 29 September.