MTN Uganda, a subsidiary of South African MTN Group, has received a syndicated loan worth US$114mn, the proceeds of which will be invested in its telecoms infrastructure network.
The loan comes amid a distinct lack of corporate issuances from the country, as corporates in Africa rarely tap the markets according to Michael Viljoen, Senior Portfolio Manager, Africa Fixed Income at Sanlam Investments.
The loan was evenly split between two tranches with different currencies, with one consisting of the equivalent of US$74mn in Ugandan shillings and the made up of foreign currencies.
Despite the local currency aspect to the loan, the lenders for both tranches for the loan were all international banks, according to one senior banker who worked on the transaction.
“The driver for having a dual currency loan was the fact that with strong borrowers such as MTN there is usually demand for hard currency funds resulting from the fact that their CAPEX programmes and many of their contracts would be denominated in dollars,” the banker continued, adding that such entities prefer to match their funding to their assets.
Another factor that weighed on the decision for a foreign currency portion is that fact that the Ugandan banking market is neither very big nor liquid, meaning it would struggle to provide sufficient local currency funding. “Transactions of this size have to source hard currency.”
The fact that MTN is a relatively strong borrower contributed to the appetite from banks wishing to participate. “The strength of the group across the continent as well as in Uganda was the main driver of appetite for this transaction,” noted the banker, who added that pricing was fairly competitive on the back of strong demand.
The loan was arranged by Stanbic Bank Uganda, Standard Bank’s subsidiary in the country, Barclays, Citigroup and Standard Chartered. The banker stated that there were not many obstacles in the arranging of the transaction.