SINGAPORE, March 6 (IFR) - India's Bollywood film industry
is set to premiere in the US dollar bond market as one of the
country's biggest distributors prepares its debut high-yield
Eros International, a film producer and distributor
listed in New York, started investor meetings last Wednesday
ahead of a potential issue of Reg S US dollar senior bonds. It
is visiting Hong Kong, Singapore and London, with an offering
slated for this week.
Eros plans to raise $200 million, plus an undisclosed
greenshoe, through five-year bonds with a call option after
three years, according to a source close to the deal. Deutsche
Bank is sole global coordinator and joint bookrunner with
Barclays, while Jefferies is lead manager.
Proceeds will help refinance a $115 million revolving credit
facility due this month.
Eros has co-produced and distributed hits like buddy cop
film Dishoom and the Akshay Kumar comedy Housefull 3. It takes
in about 30 percent of India's box office revenues and releases
around 50 films per year, far more than typical Western studios.
While there are no similar bonds in Asia, film and TV
content companies, such as Netflix and Lionsgate, have
sold bonds previously. Eros is building up its film library and
operates a digital service, making Netflix a possible reference
point from a rating point of view.
S&P has assigned a B+ rating to the bonds, which will be
issued in the name of Eros Films with a guarantee from Eros
Netflix, a B+ credit to S&P, has November 2026 bonds which
were quoted at 4.5 percent on Thursday, while Lionsgate, through
LG Financeco, has November 2024s seen at 5.2 percent, with a
rating of B– (S&P).
This will be a dollar debut for Eros, but not its first bond
offering. In 2014, it sold 50 million pounds ($62 million) of
seven-year retail bonds at 6.5 percent via arranger Investec, in
an issue that had targeted proceeds of up to 100 million pounds.
Those bonds were quoted at a cash price of 75 cents last week,
although last year’s Brexit vote and the pound’s subsequent poor
performance undoubtedly played a factor.
Eros has also endured a torrid time in the equity market.
Short sellers and social media users, including Glaucus
Research, criticised the company's accounting practices and
treatment of receivables in 2015, triggering an 81 percent share
slide between August and November 2015.
The company is currently the subject of a class action
lawsuit in the US on claims that it made material
misrepresentations about the sizes and financial performances of
its streaming video service and film library. Eros denies the
claims, but has said it will take considerable time and
resources to defend itself.
However, it benefits from strong ownership, with Capital
Research and Singapore state investment company Temasek Holdings
holding 16.7 percent and 8.6 percent, respectively, as of the
latest available filings.
Eros warned in a filing to the SEC last month that India's
sudden cancellation of high-denomination banknotes in November
would have an unknown impact on its business. The company said
it released eight films in the October-December period, down
from 15 a year earlier and warned its "short-term theatrical
revenues were negatively impacted".
However, Eros also said in January that a move to a cashless
economy would benefit its digital streaming service.
(Reporting by Daniel Stanton and Krishna Merchant; Editing by
Steve Garton and Vincent Baby)