MTN Raises $1.3 Billion of Loans as It Tests Demand for Bond

  • African operator seeks to improve ‘debt maturity structure’
  • MTN hopes to start moving money from Iran by beginning of 2017

MTN Group Ltd., Africa’s largest mobile-phone operator by sales, said it entered three loan agreements, raising more than $1.3 billion as the company markets a potential bond.

The company is being provided with $1 billion and 4.8 billion rand ($332 million) from local and international banks and financial institutions, Johannesburg-based MTN said in an e-mailed response to questions on Tuesday. MTN is on a roadshow in the U.S. and U.K. this week to gauge investor appetite for the sale of debt securities.

“These financing arrangements are in line with the MTN’s funding strategy, which aims to improve its debt maturity structure on an ongoing basis and maintain adequate bank facility headroom to support its credit rating,” the company said. “MTN’s funding strategy further aims to maintain a balance of operating currency and dollar-denominated debt.”

MTN’s move to attract funding comes after the company reported its first-ever half-year loss in August, partly caused by an agreement to settle a record 330 billion naira ($1 billion) fine in Nigeria. MTN and its subsidiaries have $3.2 billion of debt and interest payments due by the end of July next year, according to data compiled by Bloomberg. That includes a $2.75 billion bridge-term loan, a 2 billion-rand senior unsecured loan and 1.25 billion rand of bonds, the data shows.

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Two loan deals were signed on Aug. 25, according to data compiled by Bloomberg. A facility for $250 million matures in 2019 and a $750 million agreement closes in 2021, the data show. In both instances the agent for the facilities was Citigroup Inc.’s global markets unit, which was also a joint book runner along with Bank of America Merrill Lynch. The lead arrangers for the credit included units of Barclays Africa Group Ltd., Mizuho Bank Ltd., Societe Generale and State Bank of India.

There were 10 lenders in total, according to the data. They included Bank of Tokyo-Mitsubishi Ltd., JPMorgan Chase & Co., Standard Chartered Plc and Sumitomo Mitsui Banking Corp.

MTN’s subscriber base of 233 million didn’t grow during the six months through June and the company is struggling to repatriate 15.4 billion rand tied up in its Iranian unit.

“The process of repatriating money out of Iran has been more complex than we initially thought, with Iran not having ties with international banks,” MTN’s outgoing Chief Financial Officer Brett Goschen said at the company’s first-half results presentation on Aug. 5. “Every week we are getting a little bit closer, but it will take us at least five to six months to get the money out once we start the first tranche.”

MTN hopes to start moving the funds out of Iran during the first half of 2017, according to Goschen. He will leave at the end of the month and a successor has yet to be appointed.

“MTN remains confident of its ability to remit monies in the short to medium term, and is currently on a process of putting in place the appropriate governance structures to facilitate the repatriation of funds,” the company said on Tuesday.

The shares rose 2.9 percent to 119 rand on Tuesday, ending a five-day losing streak and paring losses this year to 10 percent.

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