Interview with Andras Kranicz, Managing Director and Head of Infrastructure Finance Europe, BNP Paribas

TMT Finance: Can you walk us through the strategic goals and structuring of XpFibre’s E5.8bn (US$6.06bn) refinancing package? What made this transaction particularly significant in the TMT financing landscape? 

Andras Kranicz: Over the past 10 years, XpFibre has been through a long journey of successfully rolling out and deploying fibre infrastructure in its service areas across France. In 2024, it has reached almost a fully built-out state and therefore evolved into a significantly de-risked and mature network company, benefitting from a strong financial profile underpinned by resilient cash flows generated under long-term contracts. On this basis, it was timely to implement a new permanent financing, aligning its capital structure with the utility-like and predictable nature of its business profile. 

A pivotal aspect resulting from the successful refinancing of XpFibre was the achievement of investment-grade ratings from leading rating agencies. This unlocked the availability of new pools of liquidity, particularly from a highly competitive global private placement market, offering price tension and important diversification of funding sources away from traditional bank lenders. 

This multi-sourced refinancing, which included a mix of bank facilities and fixed and floating rate institutional term loans across various tenors, sets a new benchmark for how financings in the fibre sector can be structured, balancing different maturity buckets for the debt provided by different creditor classes, at a highly competitive cost of capital. All this has been delivered on a creditor stable financing platform, previously seen only in other core infrastructure assets such as utilities. 

TMT Finance: BNP Paribas played a dual role as both capital structuring adviser and USPP agent in this deal. Could you elaborate on the complexities of balancing these responsibilities and the synergies that emerged from these roles? 

Kranicz: As financial and capital structuring adviser, our role was to focus on working with our clients  XpFibre’s management as well as shareholders to develop a financing structure in order to achieve several outcomes. Firstly, it was designed to meet the main objectives set by the key stakeholders at the outset, secondly to represent the best capital structure alternative to ensuring the highest quantum of debt at the most competitive terms, and thirdly to minimise execution uncertainty under all possible market conditions.  

Given the bank’s existing lender status to XpFibre prior to this transaction, we were able to draw on BNP Paribas’ internal expertise and experience of monitoring the evolution of XpFibre’s development and with it, having a solid grasp of its key credit drivers. This, coupled with our capital structuring and debt advisory practice within our European infrastructure team, allowed the combining of financing and structuring practices applied in other infrastructure sub-sectors (for example regulated utilities or transportation businesses) with that of XpFibre’s business specifics.  

Following the initial structuring, modelling and rating advisory workstreams, BNP Paribas was able to contribute its USPP agency capabilities through its dedicated USPP market specialists allowing XpFibre to benefit from the most accurate reading of investor demand available to it in this highly specialised, US insurance-led, private credit market.  

By bringing together our advisory and execution capabilities, BNP Paribas was able to provide integrated solutions that better aligned our clients’ strategic needs with prevailing market conditions. As you correctly pointed out, important synergies could be generated to our infrastructure clients by combining a market leading structuring, modelling, rating and debt raising advisory practice, which prides itself on leading the most complex and innovative infrastructure financing transactions over the past decade, with BNP Paribas’ leading global capital markets franchise spanning across the various financing instruments and jurisdictions. 

 To this effect, as XpFibre’s  financial adviser, we were able to guide the USPP execution to satisfy our clients’ strategical objectives and assist in explaining to the investor base the business’ operational strengths and mitigants to its challenges. At the same time, through our presence in the USPP market as a leading agent bank, the advisory team was able to benefit from real-time insights into prevailing market dynamics and investor expectations, which all fed back into refining our capital structure and ratings strategy advice to the client.  

As a bank, we constantly seek to leverage our multi-faceted product expertise across our Global Capital Markets franchise to deliver best-value propositions to our clients whenever our Infrastructure Team is engaged to advise. 

TMT Finance: The deal involved E1.2bn in US private placements (USPP) and E4.3bn in syndicated debt. What factors drove this allocation strategy, and how does it reflect current market conditions in TMT financing? 

Kranicz: The allocation strategy was shaped by the need to access a wide range of liquidity pools in order to successfully raise such a large quantum of debt which, so far in the European fibre netco financings, has been unprecedented.  

Through our presence across the various FTTH network financings across Europe, there was a certain degree of lender and investor fatigue resulting from the significant capital needs required by the creation of these fibre networks. This was one of the main factors that required careful consideration when designing the best framework for XpFibre’s large debt raise.  

Due to bank lenders’ elevated exposure levels in this sector and the lack of a readily available capital markets solutions for these network companies to recycle bank balance sheets, it was imperative from the start to design a capital structure which allowed XpFibre to tap into a variety of liquidity sources from different markets including the rated capital markets. As such, the final ringfenced structured financing platform implemented for XpFibre facilitated combining various types of pari passu senior ranking creditors such as bank lenders, US PP investors and Euro PP investors.  

Through this multi-sourced financing structure, fixed and floating rate debt instruments across several well diversified maturities were raised, which was critical to conform to rating agencies’ infrastructure methodologies for a creditor-stable financing arrangement representing the required mitigants to key structural risks (as for example refinancing risk exposure). This strategy maximised competitive tension among lenders, allowing the borrower to secure attractive terms and optimise the overall cost of debt. 

The total financing amount of E5.8bn included a E1.5bn bridge to Private Placement facility of which E1.2bn has already been placed in an inaugural USPP market issuance. This provided access to long-term, fixed-rate funding, a key element for optimising the borrower’s capital structure. 

From the remaining E4.3bn of debt underwritten by a group of lead banks, approximately E1bn was placed with a shortlist of Cornerstone lenders. This swift de-risking of the underwriters’ commitments not only reduced execution risk for our client but also built confidence for the broader syndication process followed thereafter. 

TMT Finance: The refinancing consolidates earlier debt from 2019 and 2020. What were the main challenges in structuring the deal to accommodate these prior obligations, and how did BNP Paribas help optimise the terms for XpFibre? 

Kranicz: The previous debt facilities of XpFibre were fully repaid but this refinancing came after two successive large fund-raising exercises (“Piano 1” in 2019 and “Piano 2” in 2021) where BNP Paribas was closely involved in supporting the Company during its network roll-out and dynamic growth phases. These previous debt facilities as well as most legacy subsidiary vehicle level debt were pure greenfield project financing type transactions and have now been fully refinanced. 

The main challenge for the current transaction was to design the most adequate financing structure that was aligned with the brownfield (fully rolled out) and established (cashflow generating) nature of the asset in a sector where no reference trade existed. As mentioned earlier, it was essential to set up a financing platform allowing for rated debt to be raised which meant that a covenanted, secured and fully ringfenced financing structure in line with rating agencies’ requirements for comparable infrastructure issuers needed to be implemented. This had never been done for an asset of XpFibre’s complexity and characteristics and therefore required combining different financing techniques and rating agency methodologies to arrive at the targeted outcome of an IG rated multi-creditor structured finance platform. 

BNP Paribas leveraged its understanding of both the fibre sector and XpFibre’s lifecycle in its operational development so as to offer a fully integrated service (including capital structuring and rating advisory, loan underwriting, hedging solutions, private placement agency services and ESG expertise).  

Ultimately, this highly successful refinancing represented the natural next step in our partnership with XpFibre and its shareholders, delivering a robust, long-term financing structure, which maximised the volume of debt issued at the tightest possible costs whilst preserving the required flexibilities for XpFibre to continue its successful operations for many decades to come. 

TMT Finance: With a consortium of banks underwriting the debt, what were the key considerations in assembling this particular group of financial institutions? How did BNP Paribas contribute to aligning the interests of  a diverse lender base? 

Kranicz: Assembling the group of lead underwriters required a strategic approach to ensure a balance of strong underwriting capabilities and sector expertise, all critical to ensure timely deliverability. The goal was to include the most competitive banks with proven track records in similar large-scale digital infrastructure financings and with deep understandings of the borrower’s business model and with strong relationship to XpFibre’s shareholders. 

To align the interest of this diverse lender base, BNP Paribas played a central role in structuring the optimal financing to meet the objectives of XpFibre and its shareholders while ensuring that the required lender controls were documented in a way that on one hand satisfied rating agency and credit committee requirements, but on the other also safeguarded the business’ operational flexibilities going forward. The fact that BNP Paribas was selected by the borrower and its shareholders as one of the lead underwriters in the bank group greatly contributed to providing the required credibility and executability of such a large-scale, highly complex multi-sourced financing and helped to ensure that all parties were aligned in their commitments towards the transaction’s success.  

TMT Finance: The ongoing sale of Altice’s stake in XpFibre creates additional layers of complexity. How was this considered during the refinancing process, and what implications does it have for future refinancing or capital raising efforts? 

Kranicz: Our approach focused on demonstrating the strong credit qualities of XpFibre as a standalone and independent group that is ring-fenced and fully de-linked from its shareholders.  

From a structuring standpoint, the borrower is assessed akin to a customary project financing and rated investment grade on this basis, implying the required level of creditor controls allowing it to be assessed separately from its immediate controlling shareholder (Altice). Moreover, the financing was designed with portability in mind, hence it is aligned with the shareholders’ requirements for preserving optionality for future exits.  

TMT Finance: Looking back, what were the key lessons learned from this transaction that could inform similar large-scale refinancings in the TMT sector? Are there any innovative approaches BNP Paribas introduced that you see shaping future deals? 

Kranicz: One of the key lessons learned is that high-quality digital infrastructure assets paired with appropriate financing structures, can achieve strong rating outcomes which help to unlock access to diverse and competitive debt market sources. This was demonstrated throughout the success of this transaction, which allowed for the largest European fibre netco credit issuance ever to be placed in the US Private Placement market. 

The success of the XpFibre refinancing transaction highlights the implementation of sophisticated financing technologies, to date only seen in traditional infrastructure asset classes (such as utilities, transport businesses or projects). It also proved that maturing TMT infrastructure businesses can, provided the right type of capital structure is established, also benefit from the financing savings offered by the international capital markets (including private credit instruments) and complement the flexibilities from the traditional bank lenders.  

As the first rated private placement of its kind in the European fibre sector, XpFibre sets a precedent for diversification in funding sources, enabling the issuer to reach an optimised and balanced long-term capital structure with committed liquidity satisfying the business’ ongoing capital deployment needs and at the same time optimising refinancing proceeds to its shareholders. 

TMT Finance: Finally, as a leading advisor in the deal, how does this transaction underscore BNP Paribas’ broader strategy and expertise in the TMT financing space? What’s next for the bank in this sector? 

Kranicz: This transaction is a prime example of how BNP Paribas was able to build on its deep expertise in the infrastructure financing space to deliver global, innovative and optimal solutions for its clients, including in TMT infrastructure. In this case, we navigated a complex landscape involving active shareholder dynamics, evolving French fibre regulatory considerations, and access to new capital markets for XpFibre such as the rated USPP. Our ability to help achieve these objectives demonstrated our position as a trusted partner for transformative deals in European infrastructure. It also underscored not just BNP Paribas’ technical capabilities but also our commitment to supporting clients through complex, high-profile financings, which is something we believe will be a blueprint example for these types of maturing fibre businesses in Europe. 

Strategically, this deal fully aligns with our broader objective of supporting the digital infrastructure sector that underpins the modern economy. The telecom sector is rapidly evolving with increasing capital requirements to build and maintain essential infrastructure assets such as fibre networks, telecom towers, data centres alongside other asset classes in the technology ecosystem that are critical to global connectivity and the wider digitalisation megatrend. 

I do believe that our ability to combine sector expertise with a real collaborative approach across advisory, financing and capital markets creates unique benefits we are able to convert to directly measurable financing upside for our clients. We pride ourselves on constant product innovation and relentless market leadership striving to be the market trend setters in infrastructure. Naturally, without the long-standing relationships with our wide ranging corporate and institutional client base, none of this would be possible and I cherish the trust they repeatedly place in BNP Paribas across the various infrastructure sectors. I am confident we will continue to innovate, and design tailored financing structures for our digital infrastructure clients, meeting their objectives and financing prerogatives. It has been a privilege to have been given the opportunity of partnering XpFibre and its shareholders in this journey and working through the challenges of almost 18 months of intense work.  

To your final question, I am extremely proud that our teams continue developing capital structuring solutions, in all of the digital infrastructure sectors where we are already working, to bring to market a directly comparable large fibre netco financing. At the same time, we are also progressing on a product which will offer highly cost-competitive and long-term financings for other digital asset classes such as data centres or related equipment financings.