Etisalat Raises $4.3 Billion in Bond Debut for Maroc Telecom

Emirates Telecommunications Corp. (ETISALAT) raised $4.3 billion in its first-ever bond sale as the United Arab Emirates phone company seeks funds for its acquisition of Maroc Telecom.

The offering includes 1.2 billion euros ($1.62 billion) each of seven-year and 12-year securities, according to two people with knowledge of the sale, who asked not to be identified because the information is private. That’s the biggest ever sale of bonds from a Gulf Cooperation Council borrower denominated in the European single currency, according to data compiled by Bloomberg.

Proceeds from the phone operator’s debut bond sale will go toward refinancing a 2.1 billion-euro bridge loan taken to buy the 53 percent stake in Maroc Telecom in November, Chief Financial Officer Serkan Okandan said in April. The seven-year debt priced to yield 80 basis points over the benchmark midswap rate, and the spread on the 12-year bonds was 110 basis points over the benchmark, according to the people.

“This is strong pricing, it’s more expensive than the Abu Dhabi government bond but less expensive than Dubai’s,” Mohammed Ali Yasin, managing director of NBAD Securities LLC, said by telephone from Abu Dhabi today. “Etisalat is a cash-rich company, and their Maroc Telecom plan will become a success story like they had in Saudi Arabia and Egypt.”

Africa Expansion

Etisalat, the second-largest phone company by revenue in the six-nation GCC, owns a 27 percent stake in Riyadh-based Etihad Etisalat Co. It also generated 11 percent of revenue last year from its business in Egypt, according to data compiled by Bloomberg. The operator is rated at the fourth-highest investment grade by Moody’s Investors Service and Standard & Poor’s.

The company also operates in Nigeria and in November, it expanded its presence in Africa by agreeing to buy Vivendi SA’s stake in Morocco’s biggest wireless carrier for about 4.2 billion euros.

At today’s bond sale Etisalat sold $500 million of five-year dollar-denominated notes at 67.5 basis points over the benchmark rate, and the same amount of 10-year dollar debt at a spread of 87.5 basis points.

“We have very strong corporate name out of Abu Dhabi once again,” Olga Budovnits, an emerging-market credit analyst at Union Bancaire Privee in Zurich, which manages $3.5 billion in emerging market debt, said by phone. “Etisalat diversified the investor base by splitting the issue into different currencies and maturity bands, so each type of investor gets what he wants.”

Sale Pickup

Emerging-market bond sales have accelerated this month after the European Central Bank took its deposit rate negative and announced monetary stimulus, boosting demand for developing-country assets. Emaar Malls Group LLC, which owns one of the world’s biggest shopping centers in Dubai, raised $750 million in a 10-year debut Islamic bond sale today.

Telecommunications companies in the Middle East are expanding abroad as domestic growth slows. Etisalat in May agreed to sell businesses in six west African countries to Maroc Telecom to combine assets before completing the acquisition.

The company in April signed a 3.15 billion-euro deal with 17 banks to fund its Maroc acquisition. The funding included a 12-month bridge loan of 2.1 billion euros as well as a separate three-year 1.05 billion euros loan, it said then.

Deutsche Bank AG, Goldman Sachs Group Inc., HSBC Holdings Plc and Royal Bank of Scotland Group Plc managed today’s bond sale.

To contact the reporters on this story: Arif Sharif in Dubai at asharif2@bloomberg.net; Zahra Hankir in London at zhankir@bloomberg.net

To contact the editors responsible for this story: Samuel Potter at spotter33@bloomberg.net Daliah Merzaban

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