Airtel to Float More Foreign Currency Bond Issues
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