HONG KONG, May 28, (RTRS): Fallout from the euro zone crisis could reduce appetite for Bharti Airtel Ltd’s $8.5 billion loan when it enters syndication next week, banking sources say.
Eleven banks underwrote the loan backing Bharti’s acquisition of Zain Group Ltd’s African cellular assets two months ago at 189bp all-in, pricing that was felt tight at the time.
But events in Europe have since increased US dollar funding costs for a number of banks, and a growing sense of unease is causing others to review their lending strategies.
One Asia-based source at a European bank said his bank’s US dollar funding costs had increased more than 30 basis points (bps) recently, while another source said many banks were conducting internal reviews in light of the 2008 experience, when Libor funding costs spiked and the cost of debt soared to prohibitive levels.
Bharti’s loan is not at risk since the underwriting banks have approval to lend, but a limited sell-down could see the same banks stuck with large dollar holds on their books at a time when dollar funding costs are rising.

Banking sources said Bharti was close to sealing its $10.7 billion acquisition of most of Zain Group’s African cellular assets, and was expected to fund the financing next week.
Eleven banks underwrote the $8.5 billion loan backing the deal. Lead adviser Standard Chartered Bank underwrote $1.3 billion, while co-adviser Barclays Capital underwrote $900 million. Australia and New Zealand Banking Group Ltd, Bank of America Merrill Lynch, Bank of Tokyo-Mitsubishi UFJ, BNP Paribas, Credit Agricole CIB , DBS Bank, HSBC Holdings, and Sumitomo Mitsui Banking Corp underwrote $600 million each, and State Bank of India underwrote $500 million.
Initial price talks on the financing had been as high as 300bp all-in, but pricing compression due to lack of deals early in the year forced banks to slash pricing on the loan and meet Bharti’s demands.
If syndication stalls, some of the underwriting banks may be forced to offload the assets in secondary trades at a discount, and a number of bankers said they would look to pick up the asset if that happened.

But bankers in the underwriting group said they still believed syndication would be well supported.
“Bharti will be a deleveraging story,” said one banker from the underwriting group.
The borrower has indicated to investors and rating agencies that it will start deleveraging its balance sheet once the merger is completed.
Both Fitch and Standard & Poor’s placed Bharti’s BBB- rating on negative watch earlier this year, citing increased leverage as a result of the Zain acquisition.
“Bharti has good relationships and banks are expected to support the deal,” said another syndicate banker on the deal.
Further supporting the deal is Bharti’s rarity value. This is the borrower’s first venture into the syndicated loan markets, and banks heavily concentrated in lending on other Indian names like Reliance Industries and the Tata Group could view Bharti as an opportunity to diversify their portfolios.