The latest corporate bond issue by the privately held UK telecomms firm Arqiva comes against a backdrop of a strong corporate bond market that has already grown compared with last year and is expected to see more UK corporate bonds issued in the rest of the year.
Arqiva holds a strong position as the sole provider of broadcast infrastructure to the UK’s main television and radio providers like the BBC, Channel 4 and ITV, with the second string to its bow being smart metering for large utility companies.
Arqiva Broadcast Financing issues £500m bond
Arqiva Broadcast Finance Plc, a finance company within the Arqiva holding company, has launched a new £500 million bond with a 5-year maturity and a coupon of 8.625%, and plans to use the proceeds to refinance an existing junior bank loan worth £450 million.
S&P recently assigned Arqiva Broadcast Finance a B+ rating with a stable outlook. Arqiva’s new notes are effectively unsecured, being issued by a holding company with an equity claim over its operating asset base.
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As the single UK provider of transmission infrastructure, Arqiva owns and operates a network of around 1,500 radio and television transmission sites. About 75% of its revenue comes from radio and TV, while the remaining 25% is from smart meter infrastructure provided to utility companies.
Arqiva’s revenue last year was £645m, up from £613m in 2023 and £596 in 2022, the growth stemming from long-term inflation-linked services provided to its customers.
As of June last year, Arqiva’s order book stood at £2.4 billion. Full year EBITDA margins in 2024 stood at 48% with £309m EBITDA generated from £645m of revenue. The recent issuance brings the company’s net debt in at £1,483m, providing for a net leverage of 4.7 times on EBITDA.
The telecoms firm is owned by a consortium headed by investment firm Digital 9 Infrastructure [LON:DGI9] and Australia’s Macquarie Bank.
Global corporate bond market is buoyant
Arqiva’s new issue comes against a backdrop of a buoyant British corporate bond market with returns on high-yield bonds at the highest level seen this decade. The European high-yield corporate bond market has grown from €112 billion in 2009 to €385 billion in 2024 and all market indicators are pointing to further growth this year.
New issuances are already up on 2024 with big names like Vodafone recently issuing new corporate bonds raising €7.25 billion and £1.95 billion.
The S&P 500 is trading at record high levels signalling strong corporate earnings which will reflect well on bond performance. The iTraxx Xover index, the crossover index for credit default swaps (CFDs) that track the default risk of a basket of 75 European corporate bonds, is at 281 basis points, indicating a healthy market where default risk is not high.
Returns from high-yield bonds have consistently outperformed returns on equities in the last 15 years with this difference widening as the tariff turmoil and geopolitics keep negatively affecting stocks.
