Alloha secures $350 million bond; eB Capital in talks with strategics

Alloha Fibra – the fiber optic services provider controlled by eB Capital, which now operates under the brand Giga+ – just raised $350 million with the issuance of its first bond. The paper was issued with a yield of 12.25% and matures in February 2032. The funds will be used to refinance short- and medium-term debts, lengthening the company's average liability term by about a year and a half.

“It's a refinancing project,” CEO Roger Solé told Brazil Journal. “We had very short debts, which made the operation difficult because we were always thinking about the next maturity.” After currency protection, the cost of the new debt will be just above CDI plus 4% – high, but not far from the company's cost of capital, according to Eduardo Sirotsky Melzer, or Duda, CEO of eB Capital and chairman of Alloha.

“When you look only at the rate, it may seem high, but we're talking about a first issue in a sector that had never done this in Brazil – in a rather adverse context,” Duda said. The refinancing comes at a time when eB Capital is running a process to give exit to Alloha's minority investors – who own 30% of capital – and potentially combine the asset with a strategic player, sources close to the matter told Brazil Journal.

Over the past years, Melzer had talks with TIM Brasil and V.Tal. More recently, a conversation that prospered was with Zaaz, controlled by the Argentine group Werthein and owner of SKY in Brazil, these sources said, noting that an agreement doesn't seem imminent. Melzer denies that any negotiation is underway. The bond placement was led by Goldman Sachs, in a consortium that also includes Bradesco BBI, Itaú BBA, and UBS BB.

During the roadshow, Solé and CFO Felipe Matsunaga spoke with over 80 investors. According to Duda, demand reached almost $500 million, and over 95% of the book was with international investors. The bonds are secured by Alloha's network infrastructure – a structure similar to the one used in the company's debentures, which have priority in a credit event.

Alloha closed the first quarter with a net debt of approximately R$2.36 billion. Leverage was 3.5x EBITDA. About R$400 million is short-term loans. The company had obtained a waiver at the end of last year, temporarily raising the indicator ceiling to avoid an early debt maturity. The indebtedness is a result of Alloha's expansion cycle, created from the consolidation of several regional providers.

Since 2018, the company has carried out a series of acquisitions and expanded its presence to over 860 cities in 22 states. Last year, however, management changed priority: it stopped pursuing growth at any cost and began to focus its efforts on profitability, operational integration, and cash generation. According to Solé, this recovery was one of the main arguments presented to investors during the roadshow.

“The international market didn't want a promise or a plan for three years from now,” the CEO said. “They wanted to see that the turnaround was already happening.” According to Solé, the strategy now is not to build networks in new regions, which would require more capex and put the company in markets with fierce competition. Alloha intends to grow using the infrastructure it already has.

The company has about 145,000 kilometers of fiber and a network that passes in front of 8.3 million households. As it has less than 1.4 million clients, penetration is still close to 17%. “We have a network that has already been built and paid for, and that no one can replicate overnight,” Solé said. “Our job is to monetize these assets with operational excellence.”