Jacob Bennett, Ropes & Gray

In May 2021, the UK’s Competition & Markets Authority (CMA) announced its final approval of the 50:50 joint venture between Liberty Global and Telefonica to combine Virgin Media and O2 and the transaction closed in June 2021.

Ropes & Gray led on the financing aspects of Liberty Global’s JV agreement to merge O2 with Virgin Media, to create the UK’s leading fixed-mobile provider and a company with a value of more than £30bn.

Led by London finance partners Robert Haak and Alex Robb, the deal valued O2 at £12.7bn and Virgin Media at £18.7bn, both on a total enterprise value basis, and combined the two to create a nationwide integrated communications provider with more than 46 million video, broadband and mobile subscribers, and £11bn of revenue.

Jacob Bennett was lead associate on the finance side of the deal. He joined Ropes & Gray in October 2018, having qualified in the Manchester office of Addleshaw Goddard in 2016. “Over the course of my career to date, I’ve been fortunate enough to have been able to advise on a wide variety of financings, for a multitude of different clients across multiple sectors,” he says.

“At Ropes & Gray, our core strength is in the leveraged and acquisition finance space advising banks, direct lenders and sponsors – so the type of deals that commonly come across my desk fall within that category. That said, given our reputation in the market for being able to offer swift and excellent advice across the most complicated and innovative of capital structures, I am afforded a broad and varied diet of work (including prior experience of advising on bespoke financing solutions such as litigation financings and asset-based financings). It’s this breadth and variety of both clients and products which keeps the job interesting and enjoyable and ensures that no day is ever the same.”

At Ropes & Gray he mainly works under Robb, also assisting him on Liberty Global’s take private of Sunrise Communications, the financing associated with which closed only a couple of weeks prior to the signing of the financing for the Virgin Media and O2 merger.

In September 2020, Ropes & Gray, again led by Robb and Haak, advised Virgin Media, Liberty Global and O2 as sponsor and borrower on the £5.7bn-equivalent, bond and loan secured financing in connection with the JV combination.

The deal has been recognised by Debtwire as one of the top 10 largest deals in Western Europe of 2020, demonstrating Ropes & Gray’s core strength in the leveraged and acquisition finance space, and its strong relationship and reputation with leading global corporate sponsors.

“With Virgin Media and O2 both being heavyweights in the UK telecoms space, this joint venture merger was a market defining transaction which created the UK’s leading nationwide integrated communications provider,” Bennett explains.

“When you combine the significance of the underlying transaction with the sheer size of the financing required to execute it, ultimately being an upsize to the existing leveraged debt quantum by circa £5.7bn in aggregate across new bond and loan issuances, you end up with a remarkable transaction. Normally that would be enough for this deal to be memorable but given the fact it was conceived and executed during such an uncertain and turbulent time across the globe, it will definitely be a deal which continues to stand out for me throughout the rest of my career and something that I am incredibly proud to have been able to advise on.”

Despite the contextual pressures of the pandemic, Bennett says there wasn’t one moment where he thought the firm could have achieved more had it not been working remotely. “The benefits, however, I thought were hugely felt including the reality that working flexibly from home enabled us as a team to be even more nimble in ensuring that our client’s goals were achieved within the requisite timescale,” he adds.

“That presence in one physical location is not the be all and end all of teamwork. As long as people are willing to embrace technology and remain in contact with other team members, teams can flourish and the work they produce can remain excellent.”

The O2-Virgin Media deal

The deal involved a complex series of large financings across the summer of 2020, including issuances of senior secured notes, senior notes and vendor financing notes, and the refinancing of 11 sets of existing high yield bonds and vendor financing notes issued by the Virgin Media group which would have prohibited the transaction. The final step involved raising new loan commitments on a certain funds basis and the issuance of senior secured bonds into escrow, in an aggregate amount of £5.7bn-equivalent, which were funded at completion of the joint venture to lever the combined EBITDA of the two operating groups to the desired level.

The latest senior secured notes were also issued out of a new special purpose financing entity owned by the new joint venture entity, but outside of the covenant group. The proceeds of the bonds funded additional facilities under the existing Virgin Media senior facilities agreement (VM SFA) such that the new issuer became a lender under the VM SFA. The latest loans were split between institutional TLA and syndicated TLB market tranches, in all 28 banks were mandated to provide committed financing.

The structure of the financing involved combining two operating groups together to create one financing group (including for covenant and reporting purposes) but keeping them as separate operating groups (as sister groups under the new joint venture entity). This was achieved with various covenant party accessions with cross guarantee and security support – the mechanics for which were baked into all the various debt instruments.

Bennett says he feels fortunate to have been able to work with people of all levels of seniority, both clients and colleagues, on this deal. “As you’d expect with two mature and sophisticated operating groups like Virgin Media and O2, they had a large amount of existing financing arrangements in place prior to the merger. This reality meant that the complex series of large financings which were required to be executed in order to effect the merger needed to be carefully structured in order to navigate the large amount of existing financing arrangements already in place and also necessitated the refinancing of 11 sets of existing high yield bonds and vendor financing notes which would otherwise have prohibited the joint venture transaction from occurring,” he explains.

He says the size, significance and the wider context of it being executed during a global pandemic will always make this deal stand out, as will having the opportunity to work so closely with Haak and the rest of the high yield bond team.

“At Ropes & Gray we’ve always prided ourselves on the strength of our expertise across both loans and high yield bonds, but to have the opportunity to work extremely closely with my high yield colleagues and exhibit our ability to work across both platforms in such a seamless manner on an incredibly important financing like this presented a unique opportunity to exhibit this strength to the market,” he adds.

All the new financing arrangements were carefully structured to navigate the large amount of existing financing arrangements in place across each operating group. The deal has created one of the strongest fixed and mobile competitors in the UK market, a watershed moment in the history of telecommunications in the UK.

The transaction as a whole showcased Ropes & Gray’s ability to manage multiple financing transactions across various products in a short timeframe, including six bond issuances in a three week period. This required close coordination with various internal teams within the client as well as various specialised practices within Ropes & Gray, coordinating in an extremely time sensitive situation.

Bennett says the deal has “set a benchmark in my career of what can be achieved,” particularly highlighting what can be achieved despite a difficult context. “The high activity levels in the market since the summer of last year have continued unabated so our team has been very busy. I personally have been involved in advising on a number of bids, refinancings and new working capital lines for some of our key clients across various sectors. Recently, I advised the senior lenders on EQT’s successful acquisition of Parcel2Go, which, being headquartered in Bolton, was particularly great to be involved in given I am a card-carrying Northerner.”