Structure of new financing of Polsat Group September 22 nd, 2015 Cyfrowy Polsat S.A. Capital Group
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Contents 1. Refinancing in a broader context 2. Key parameters of the new financing 3. Short-term impact 4. Summary 5. Q&A
1. Refinancing in a broader context
Multiple external factors and Polsat Group s internal activities supported refinancing... Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 (PLN bn) Favourable macro perspectives for Poland 4,8% 1,7% GDP Poland 1,8% 1,7% 3,4% -0,5% 0,2% GDP EU28 3,3% 3,4% 1,4% 1,8% 2,1% 2011 2012 2013 2014 2015F 2016F HCPI % Historically low local interest rates and stable EUR/PLN rate 6 5 4 3 2 1 0 4,42 WIBOR 3M EUR/PLN EURIBOR 3M 4,09 4,15 4,26 4,20 High appetite of financial institutions for corporate debt high liquidity in the Polish banking sector a demand for corporate bonds after regulatory changes relating to pension funds favourable perception built by Polish corporates on EUR/USD bonds markets Strong relations between Polsat Group and financial institutions continued cooperation with local banking sector ongoing communication with bondholders and rating agencies consistent deleveraging policy Gross debt 23% 3,9% 3,7% 0,8% 0,1% -0,4% 1,1% 16.3 12.4 2011 2012 2013 2014 2015F 2016F 2011 2012 2013 2014 current 2011PF 2Q'15 Source: GUS, Eurostat, NBP 5
nevertheless broader environment was a major source of risks for the project Sizeable weakening of EUR and PLN against USD February 2015 a launch of still unfinished 800/2600MHz auction July 2015 Greek referendum in the investors spotlight August 2015 China slow down exerts negative pressure on financial markets 3,42 3,10 USD/PLN 3,01 3,51 3,68 1500 1000? 500 2011 2012 2013 2014 current 0 Feb Mar Apr May Jun Jul Aug Sep Oct Source: NBP 6
Refinancing will be fully finalized in January 2016 Beginning of preliminary analyses regarding refinancing of the entire existing debt Issuance of unsecured CP bonds Scheduled drawing PLN 4.8 bn of the New SFA Scheduled redemption of PLK USD/EUR HY Notes Scheduled finalization of the refinancing process April 2015 July 2015 January 2016 June 2015 Commencing negotiations with financing institutions regarding conclusion of new senior term loans September 2015 Conclusion of the New Senior Facilities Agreements Drawing PLN 6.7 bn of the New SFA Full repayment of the old CP & PLK SFAs 7
Historically largest corporate financing in the Polish zloty TPSA (2010) PGNiG (2010) PKN ORLEN (2011) Polkomtel (2011) CP (2011) ENEA (2012) Tauron (2012) Polkomtel (2013) PKN ORLEN (2014) KGHM (2014) PGNiG (2014) CP (2014) CP+Polkomtel (2015) CP - bonds (2015) (PLN bn) EUR/USD/other PLN 14.4 17.4 13.5 12.5 10.3 8.0 8.4 7.6 7.0 2.0 3.0 3.0 4.0 2.8 3.0 1.0 Source: own study based on Thomson Reuters 8
Broad consortium of financial institutions involved in the New SFA Borrowers Legal and financial advisors Consortium of 20 financial institutions Global coordinators Remaining entities within the consortium 9
2. Key parameters of the new financing
Key parameters of the new financing New SFA Series A Bonds Nominal / Currency PLN 11.5 bn + PLN 1 bn (RCF) PLN 1 bn Tenure 5 years, partly amortized 6 years, bullet repayment Borrowers / Issuer Cyfrowy Polsat, Polkomtel Cyfrowy Polsat Interest / Coupon WIBOR + margin dependent on leverage ratio WIBOR + 250bps margin step-up if leverage ratio >3.5x Interest period Quarterly (1) Semi-annual (January/July) Security Secured (as long as leverage >1.75x) Unsecured Financial covenants Leverage secured Total leverage Interest cover Debt service cover <3.5x <4.2x >2.0x >1.2x Leverage ratio Interest cover <4.5x >1.5x Note: (1) With an option to pay in monthly or semi-annual periods. 11
New vs old financing comparison Old financing New financing Lowered blended interest cost 6.6% 3.6% Improved currency structure 19% EUR, 15% USD, 66% PLN 100% PLN Increased RCF PLN 500 mln (CP) + PLN 300 mln (PLK) PLN 1 bn (CP+PLK) Diversification of financing sources banks + EUR/USD bond investors banks + PLN bond investors Unification of covenants Limitation of security packages Increased operating and financial flexibility for the Group Increased flexibility regarding potential future indebtedness Increased flexibility regarding potential future investments Impact on credit ratings 2 divergent sets of covenants for CP and PLK broad list of securities; separate packages regarding CP and PLK separated credit pools, limited cash flows among companies of Polsat Group limited possibilities of drawing new financing highly limited baskets for investments ratings under pressure of numerous limitations resulting from separated debt pools one common set of covenants limited and unified list of securities, potentially securities to be released once leverage <1.75x ease of cash transfers within the Group "evergreen structure significantly bigger baskets for investments increased flexibility and decreased interest cost expected to support perspective of ratings 12
Modification of the indebtedness structure will be executed in 2 steps end of 2Q 15 intermediate (3-4Q 15) after refinancing (1Q 16 onwards) PLN mln nominal value PLN mln nominal value PLN mln nominal value CP Group (excl. PLK) SFA (PLN) 2,178 RCF 70 PLK Group SFA (PLN) 6,020 RCF 0 PLK High Yield Notes EUR 1/ USD 2 4,158 CP Group (incl. PLK) New SFA (PLN) 6,700 New RCF (PLN) 0 New CP Bonds (PLN) 1,000 PLK Group PLK High Yield Notes EUR 1/ USD 2 4,158 CP Group (incl. PLK) New SFA (PLN) 3 11,292 New RCF (PLN) 0 New CP Bonds (PLN) 1,000 Source: Interim condensed consolidated financial statements for the 3 and 6 month periods ended 30 June 2015 and internal analysis Note: (1) Nominal value of PLK Senior Notes of EUR 542.5 m, as converted based on the average NBP exchange rate from 30 June 2015 of 4.1944 PLN/EUR. (2) Nominal value of PLK Senior Notes of PLK USD 500 m, as converted based on the average NBP exchange rate from 30 June 2015 of 3.7645 PLN/USD. (3) After repayment scheduled for 31 March 2016. 13
Final effects of the refinancing surpassed our initial assumptions 6.6% -3.0 p.p. (1) Reduction of blended interest cost (1) 3.6% old financing new financing Interest savings (2) approx. PLN 380 mln per annum Note: (1) Concerns blended costs of CP Group and PLK Group indebtedness, applying current WIBOR rates. (2) Based on initial nominal of PLN 12.5 bn and leverage ratio as reported at 30 June 2015. 14
Margin grid promotes further deleveraging of Polsat Group basis points Margins in reference to leverage level (1) 350 325 net debt / EBITDA 30/06/15 Unsecured CP bonds New SFA 300 250 200 210 250 150 110 100 50 0 net debt / EBITDA 4,5 4,0 3,5 3,0 2,5 2,0 1,5 1,0 0,5 Note: (1) Leverage ratio is tested on a quarterly basis, new margin set after a change of leverage level is reported (no backwards corrections implemented). 15
Ordered maturity profile of the new indebtedness Old debt maturity profile 1 New debt maturity profile 2 (PLN mln) (PLN mln) 7,439 3,666 4,158 228 1,264 1,114 1,926 858 963 1,068 1,173 1,000 2015 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 2021 New SFA Series A Bonds Extended maturity of the new financing guarantees increased flexibility for further development At the same time the New SFA guarantees full flexibility in reference to voluntary prepayments Note: (1) Nominal value of the debt, excl. RCF as at 1H 15. (2) Nominal value of the debt, after finalization of the refinancing and HY Notes redemption. 16
3. Short-term impact
One-offs relating to the refinancing PLN mln P&L impact CF impact Write-off of HY Notes valuation surplus (1) +780 3Q 2015 - - Recognition of HY Notes call option cost (2) -242 3Q 2015-242 1Q 2016 Write-off of old SFAs organization costs -66 3Q 2015 - - Notes: (1) 3Q 2015 write-off as presented includes most of existing surplus in HY Notes valuation to fair value at the moment of Metelem acquisition, while remaining part will be recognized through P&L until the date of the HY Notes redemption; (2) An equivalent of 5.875% of the nominal value of EUR Notes and 5.813% of USD Notes, converted based on 4.1994 and 3.7315, respectively, per PLN exchange rates; subject to change according to future f/x fluctuations. 18
Interest payments schedule for 2016-2017 400 300 (PLN mln) HY interest New SFA interest CP Bonds interest 200 100 0 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 19
4. Summary
Summary The biggest so far fully PLN based corporate refinancing in Poland Noticeable increase in flexibility relating to both operational activities, as well as further development Significantly increased potential for generating FCF as a consequence of PLN 380 mln per annum reduced interest costs Continued deleveraging policy 21
5. Q&A
Contact Investor Relations Łubinowa 4A 03-878 Warszawa Tel.: +48 (22) 356 6004 / +48 (22) 426 85 62 / +48 (22) 356 65 20 Email: ir@cyfrowypolsat.pl www.grupapolsat.pl