Background
On 12th of November 2017, Omantel acquired 21.9% stake in Mobile Telecommunications Co Kuwait (Zain) to become the company’s second largest shareholder, with the acquisition financed through a borrowing of USD2.25bn, split between a Bridge-bond Facility of USD1.45bn and a Term Loan Facility of USD800mn.
Following the acquisition – the largest outbound M&A deal in Oman’s history, which allowed for the formation of an 11% regional telecom powerhouse – the firm was looking to take advantage of a flattening rates curve and extend its overall maturity profile with a new issue.
Despite a volatile market environment and following two jumbo GCC issuances by the Kingdom of Saudi Arabia and the State of Qatar (raising a combined USD23bn), Omantel took advantage of a lucrative window and conducted a deal roadshow in the UAE, UK and the U.S., after which the transaction was announced on April 17th, including a debut USD1.5bn 144A/RegS Senior secured offering across a 5.5-year (USD600mn) and a 10-year (USD900mn) tranches.
Transaction Breakdown
In Spring 2018 the company went ahead with refinancing the bridge loan by issuing senior bonds, which had pari passu ranking with the loans and were secured with Omantel’s shares in Oztel (the issuing entity) and Oztel’s shares in Zain. The conventional structure was embraced for this transaction due to its appeal to the widest possible investor base, while security over the shares served as an additional credit enhancement, removing the need for financial covenants.
In early April the company began a comprehensive and targeted roadshow, meeting over 65 investors across Dubai, London, New York and Boston. Key questions from investors centred mostly on Omantel’s growth strategy, competitive positioning and view surrounding the acquisition of the stake in Zain.
After monitoring market conditions closely, it saw a window opening up on April 16 on the back of strong Asian market performance. That prompted the issuer to swiftly release IPTs of 6.375% - 6.500% for the 5.5-year and 7.250% area for the 10-year tranche of a USD1.5bn 144A/RegS Senior bond.
Books quickly grew to more than USD4.25bn ahead of US open, with an almost equal split between the tenors. The strong indications by a broad and diversified investor group allowed for a rapid book building, supported by real money accounts, with price guidance tightening to 6.125% - 6.250% and 7.250% - 7.125% for the 5.5-year and 10-year tranches respectively.
The orderbook reached a peak of USD8bn representing an 8x oversubscription rate – the highest across MENAT in 2018 – before settling at USD6.9bn. The 5.5-year tranche tightened by 50bps from IPTs, while the 10-year tranche was tightened by 37.5bps – without any material drops of orders.
The deal was not reliant on regional support, with Middle East only accounting for 11% in the 5.5-year tranche and 9% in the 10-year tranche. By geography, the 5.5-year – a fairly uncommon tenor in this market – saw heavy demand from across the globe. About 41% of the notes were placed with investors from Europe and the UK, 38% were allocated with US accounts and 10% with investors in Asia. For the 10-year, the respective figures were 47%, 33% and 11%.
By type, the 73% of the 5.5-year notes went to asset and fund managers (70% for the 10-year tranche), 22% were snapped up by banks and private banks (same for 10-year tranche), and the remaining 5% went to insurance/pension funds and corporates (8% for the 10-year tranche).
The debut bond marked the largest corporate offering from Oman to date, and the first dual-tranche conventional transaction by an Omani corporate.
