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CASE STUDY: MTN Comes Back from Downgrade to Price at Tight End on US$1bn Bond

African telecoms giant MTN Group overcame bearish sentiment precipitated by last September’s Nigerian sovereign downgrade, along with that of its Nigerian subsidiary, to successfully price a US$1bn dual-tranche bond at the tight end of guidance.

Mar 27, 2017 // 4:55PM


In the fourth quarter of 2016, MTN Group, which operates in 22 countries in Africa and the Middle East, sought fresh funding to help refinance existing debt and fund new capital expenditure.

The telco was able to successfully place a US$1bn dual-tranche bond, its largest public debt offering after its capital markets debut in 2014.

Transaction Breakdown

The transaction, initially intended to range between US$500mn and US$750mn across one tranche, was preceded by a series of investor meetings across New York, Boston, Los Angeles and London.

Following the successful conclusion of the roadshow, MTN continued to monitor the markets in light of the downgrade of the Republic of Nigeria by S&P from ‘B+’ to ‘B’ on 16th September, 2016, given MTN’s considerable operations in the Nigerian market.

Due to MTN’s exposure to Nigeria, MTN was subsequently downgraded by S&P from ‘BBB-’ to ‘BB+’ on Friday, 30th September.

Following the rating action, on 4th October, MTN went out with an update on tenor and size expectations to the market, hosting global investor call as well as a series of additional one-to-one investor meetings.

After securing investor feedback MTN split the issuance into two tranches to cover its bases on tenor and risk appetite, the transaction was announced at 9.05AM GMT on 5 October as an upsized dual-tranche offering with initial price thoughts set at “5.375-5.500%” for the long 5-year and “6.500% area” for the 10-year tranches, respectively.

Within hours of the book’s opening the orderbook grew to US$1.8bn from over 160 accounts. At 2:22PM the company set final yields at 5.375% for the long 5-year tranche, at the tight end of initial price thoughts, and 6.500% for the 10-year tranche, pricing the trade at UST+411bp and UST 477.7bp for the 5 and 10-year tranches, respectively.

The books on both tranches were heavily skewed towards US and UK accounts. On the long 5-year tranche, 49% was placed with accounts in the UK, 12% with the US, 14% Europe and 15% the rest of the world. On the 10-year tranche, 49% of the notes were places with accounts in the US, 34% with the UK, 8% with Europe and 8% with accounts based elsewhere.

The deal marked MTN’s first capital markets transaction since 2014, and its largest to date. It was also one of the first African corporates to access the US Dollar market since July 2015, successfully reopening the market to other issuers in the region.

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