Alloha Fibra Secures $350M Debt Financing

Alloha Fibra, the fiber optic service provider formerly known as Giga+, has successfully raised $350 million through its inaugural bond issuance. This significant debt financing, led by Goldman Sachs with participation from Bradesco BBI, Itaú BBA, and UBS BB, aims to restructure the company's short- and medium-term liabilities, extending its average debt maturity by approximately 18 months.

The bond carries a yield of 12.25% and matures in February 2032. While the initial rate appears high, eB Capital, the controlling shareholder, views it as a strategic move in a challenging market. Eduardo Sirotsky Melzer (Duda), CEO of eB Capital and Chairman of Alloha, highlighted that the effective cost, after currency hedging, will be slightly above CDI plus 4%. He emphasized the significance of this issuance as a first for a Brazilian fiber provider, navigating a complex economic environment.

This financial maneuver coincides with eB Capital exploring strategic options for its minority shareholders in Alloha, who hold a 30% stake. Discussions have reportedly involved potential combinations with strategic players in the telecommunications sector. While Duda has previously engaged with entities like TIM Brasil and V.Tal, recent conversations have focused on Zaaz, an Argentine group controlled by the Werthein group, which also owns SKY in Brazil. However, Duda denies any ongoing negotiations.

The bond placement garnered substantial interest, with demand reaching nearly $500 million, predominantly from international investors, who accounted for over 95% of the book. The issuance is secured by Alloha's extensive network infrastructure, a structure mirroring its existing debentures which hold priority in credit events. Alloha's financial position at the end of Q1 showed a net debt of approximately R$ 2.36 billion, with a leverage ratio of 3.5x EBITDA, including around R$ 400 million in short-term loans. The company had previously secured a waiver to temporarily increase its leverage ceiling, averting early debt repayment.

Alloha's debt profile is a consequence of its aggressive expansion strategy, consolidating numerous regional providers since 2018 and establishing a presence in over 860 cities across 22 states. However, the company has shifted its focus from rapid growth to profitability, operational integration, and cash generation. CEO Roger Solé stated that this turnaround narrative was crucial in convincing investors, who sought evidence of ongoing recovery rather than future promises.

The company's current strategy centers on maximizing value from its existing infrastructure rather than costly new network builds in competitive markets. Alloha boasts approximately 145,000 kilometers of fiber, reaching 8.3 million households, yet serves fewer than 1.4 million customers, indicating a penetration rate of around 17%. Solé stressed the unique advantage of their established, paid-for network, which is difficult for competitors to replicate, and the company's commitment to monetizing these assets through operational excellence.