United Group issues €750 million in new bonds with high risk but stable strategy

United Group, a leading telecommunications and media company in Southeast Europe, has announced the successful refinancing of secured bonds amounting to €600 million maturing in 2026, through the issuance of new seven-year bonds worth €750 million. These bonds carry a coupon interest rate of 6.5 percent, and the proceeds will also be used to repay revolving credit. Although refinancing does not increase the company’s net debt, it certainly provides greater flexibility in debt management.

The financial strategy of United Group is clearly based on a long-term outlook, as evidenced by a similar refinancing in January 2024, when they refinanced debt amounting to €1.73 billion. This transaction allowed them to repay bonds maturing in 2026 and 2029, as well as PIK bonds from 2025, significantly extending the maturity of the debt and reducing interest costs, thereby ensuring greater stability in managing their financial obligations, which is quite important for a company operating in relatively unstable markets.

– We are pleased with the strong demand for our new seven-year bonds worth €750 million. This transaction aligns with our financing strategy aimed at proactively addressing short-term maturing debts and establishing a stable long-term financial structure. The refinancing is a result of continuous revenue growth, adjusted EBITDA of 28 percent, and a compound annual growth rate (CAGR) of 25 percent from 2015 to 2023, as a result of organic growth and acquisitions. It also follows immediately after the successful refinancing in January 2024, amounting to €1.73 billion – said Janez Živko, Vice President of United Group for Finance.

Growth driven by acquisitions

However, despite these steps, the company’s credit rating remains relatively low, with ratings of B2 from Moody’s and B from S&P, reflecting the level of risk associated with their debt and operations in a region with political and economic challenges. It is worth noting that United Group operates not only in Croatia but also in markets such as Serbia, Bulgaria, and Greece, where they face competition and regulatory challenges, but also opportunities for growth.

The company relies on a multi-faceted business model that includes telecommunications, media, and IT services, and their growth strategy is based on expanding mobile and fixed networks, developing 5G technology, and acquisitions such as the takeover of Bulsatcom in Bulgaria, which allowed them to expand their offerings in a new market and strengthen their position in the region.

As Živko mentioned, over the past eight years, United Group has achieved an average annual growth rate (CAGR) of 25 percent thanks to a combination of organic growth and acquisitions, and the company’s history shows a successful acquisition model – in the last two decades, the Group has completed nearly 150 acquisitions, significantly expanding its reach and diversifying its business. Nevertheless, their level of indebtedness still poses a risk. At the end of 2023, the net debt to EBITDA ratio was 4.20x, indicating a high level of indebtedness, although this is an improvement from 4.96x in 2022.

Their focus on maintaining liquidity and managing debt through refinancing can be seen as a necessary response to high indebtedness, but also as an opportunity for the company to capitalize on current investor interest. The interest rate of 6.5 percent on the new bonds is considered relatively high, which also indicates the risks associated with operating in the dynamic region of Southeast Europe, but the strong demand for the bonds still indicates investor confidence in the Group’s long-term potential.