Air­tel to Float More For­eign Cur­rency Bond Is­sues

The Economic Times - - Companies - OUR BUREAU

Bharti Air­tel is rais­ing more over­seas debt, as it has ap­proached in­vestors to sell sev­enyear euro-de­nom­i­nated bonds and 10-year se­cu­ri­ties in US dol­lars. Most of the pro­ceeds will be used for re­pay­ing costlier for­eign-cur­rency debt, a strat­egy the tele­com op­er­a­tor has been em­ploy­ing to re­duce fi­nanc­ing cost.

Though the com­pany didn’t spec­ify the size of the of­fer­ings, ac­cord­ing to an ex­ec­u­tive it will raise a min­i­mum of $500 mil­lion in each cur­rency.

As re­ported ear­lier by ET, the com­pany is look­ing to raise as much as $2 bil­lion this year to re­fi­nance its ex­ist­ing debt and bring down fi­nance costs. Be­cause of high lo­cal in­ter­est rates, sell­ing debt abroad is cheaper than rais­ing funds at home.

In a no­tice to stock ex­changes Mon­day, Bharti Air­tel, the na­tion’s No 1 and world’s fourth largest tele­com op­er­a­tor, said it will guar­an­tee the se­nior un­se­cured bonds to be is­sued by unit Bharti Air­tel In­ter­na­tional (Nether­lands) BV. It will use the pro­ceeds to mainly re­pay or re­fi­nance ex­ist­ing for­eign cur­rency debt. Re­main­ing funds will be used for gen­eral cor­po­rate pur­poses, the com­pany said.

The dol­lar bonds would be listed on the Sin­ga­pore Stock Ex­change and the euro notes on the open mar­ket of the Frankfurt Stock Ex­change.

Af­ter tap­ping the dol­lar and euro bond mar­kets in 2013 and early 2014, the com­pany in March floated six-year bonds worth 350 mil­lion Swiss francs at an ef­fec­tive in­ter­est rate of 3%, mak­ing it the largest ever of­fer­ing floated by an In­dian en­tity in the Swiss cur­rency. So far Bharti Air­tel has raised close to $3.27 bil­lion in bonds.

“Cor­po­rates have been us­ing long-term in­stru­ments to op­ti­mise costs, and when these are re­ceived well by the sub­scribers it shows that the fu­ture out­look for the in­dus­try is very pos­i­tive,” Hemant Joshi of Deloitte Hask­ins & Sells said. “And, that also brings down the net fi­nance costs for the cor­po­rates, thus im­prov­ing the prof­itabil­ity mar­gin.”

Helped by its re­fi­nanc­ing strat­egy, Bharti Air­tel was able to bring down its net fi­nanc­ing cost by 11% to .` 9,911 crore in the fourth quar­ter of fis­cal 2013-14. It re­duced its net debt by $655 mil­lion to $10.074 bil­lion dur­ing the year. Most of the debt is used for the com­pany's Africa op­er­a­tions.

Its net debt to Ebidta ra­tio im­proved to 2.20 from 2.51. Aided by im­proved op­er­a­tional per­for­mance and growth in data rev­enue, the com­pany recorded nearly 22% growth in net profit to .` 2,773 crore dur­ing the year. Bharti Air­tel, the guar­an­tor, is rated BBB-mi­nus by both Fitch and S&P and Baa3 by Moody’s, the com­pany said.

Most of the pro­ceeds will be used for re­pay­ing costlier for­eign­cur­rency debt, a strat­egy co has been em­ploy­ing to re­duce fi­nanc­ing cost

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