HONG KONG, March 16, (RTRS): India’s Bharti Airtel, in talks to buy the African mobile operations of Kuwait’s Zain for $9 billion, has issued a term sheet to banks to raise up to $8.5 billion in offshore loans to fund the deal, banking sources said.
The six-year offshore facility has four tranches and carries a blended average life of 4.75 years, with a margin ranging from 176 basis points to 179 bps over Libor, the sources said.
Previously, Bharti was said to be looking for a $9 billion facility, which also included an onshore rupee tranche.
Bankers familiar with the deal said that the all-in pricing is below all expectations, which ranged from 200 bps to 250 bps above Libor.
Bharti, which is India’s largest cellular carrier, is in talks to buy Zain’s operations in 15 African countries. Exclusive negotiations are scheduled to lapse on March 25.
A banker familiar with the deal said that Bharti opted to drop the onshore tranche of its loan due to the strong response from offshore lenders. By raising the facility all in US dollars, the borrower also minimises execution risks and the time needed to complete the financing, the same banker said.
Barclays Capital, Citigroup, Standard Chartered Bank and State Bank of India are expected to underwrite larger amounts than other banks.
Banks have until Wednesday to respond to the borrower, while documentation is expected to be completed by Friday.
A Bharti spokesman declined comment.
Banks have been offered a 60 bps fee to underwrite $650 million or more, one source said.
Around 11 other shortlisted banks also received the term sheet, including: ANZ, Bank of America Merrill Lynch, Bank of Tokyo-Mitsubishi UFJ, BNP Paribas, Credit Agricole CIB, DBS Bank, HSBC, JPMorgan, Royal Bank of Scotland and Sumitomo Mitsui Banking Corp.
Kuwaiti telecom Zain and India’s Bharti Airtel have faced no obstacles in due diligence and expect the $9 billion deal to close on time, a Kuwaiti newspaper said on Tuesday.
Daily Al-Rai, quoting unnamed sources familiar with the deal, said both firms were keen on closing the sale of Zain’s African assets to Bharti on March 25 as scheduled.
Meanwhile, Bharti Airtel looks set to land its $9-billion purchase of Zain’s African assets, overcoming a stumbling block posed by an ownership spat over Zain’s Nigerian units.
A dispute between Zain Nigeria and South Africa-based Econet Wireless Holdings — a minority shareholder — had been a complication in Indian group Bharti’s third effort to get its hands on a meaningful business in Africa.
But a team of bankers from UBS, which is advising Zain, visited Nigeria with Bharti Chairman Sunil Mittal last week, sources familiar with the situation said.
They indicated the two parties had worked their way around the problem, though they did not say how.
“The Nigeria situation didn’t come as a surprise to anyone and won’t derail the deal. We are hopeful that an agreement can be reached by March 25,” one person familiar with the deal said, referring to the date on which exclusivity expires.
Bharti, which failed twice before to acquire the continent’s biggest mobile operator MTN, does not want to do the deal with Zain without the Nigerian unit — roughly a third of Zain’s African business — one of the sources said.Diligence
“We are progressing with due diligence step by step and there are no obstacles so far. Each of Zain and Bharti are keen to finalize the transaction according to the preset timetable,” according to a person quoted by the newspaper.
The paper said due diligence had been done on the majority of Zain’s African assets in major countries and only procedural steps, which are unlikely to change the final report, remain.
The newspaper quoted sources as saying Bharti, India’s largest telecoms firm, is expected to name the final bank consortium on the deal.
Bharti’s exclusive talks with Zain run until March 25, and follow two failed attempts by the Indian firm to tie-up with South Africa’s MTN, Africa’s biggest telecoms firm.
Bharti is looking at a mix of dollar and rupee funding to finance the Zain deal, sources told Reuters last month.