MTN to test investor mood for bond sale in fund transfer struggle
MTN GROUP is gauging investor interest for its first sale of rand-denominated bonds in seven years as Africa’s largest cellphone operator struggles to repatriate earnings from its Nigerian business.
MTN was “approaching the market and we will see what the appetite is” for debt in the South African currency, said Nik Kershaw, the company’s investor relations executive.
The operator has room to raise as much as R4 billion for its South African unit in 2017 to reduce short-term debt and refinance bank facilities amounting to R19.6bn due this year, according to Gimme Credit.
“The company will have to raise funds to maintain a comfortable cash level this year,” mainly because of declining profitability and elevated capital-expenditure levels, said Alexandre Dray, a Tel Aviv-based credit analyst for Gimme Credit, a corporate-bond research service that has an underperform rating on MTN’s dollar bonds. “There is still appetite for their debt.”
MTN is at risk of losing its investment-grade credit rating from Moody’s Investors Service as foreign-exchange shortages and an economic contraction in Nigeria limit the company’s ability to pay dividends from its most lucrative market and take on more borrowing, Moody’s said on Monday.
Net debt levels soared 64 percent to R52bn in 2016 as MTN boosted capital expenditure, incurred licence fees and paid a fine in Nigeria for not disconnecting unregistered customers.
The wireless operator has R1.25bn of bonds maturing in July as well as a term-loan of R1.46bn and revolving credit facility of R455 million that both fall due in May, according to data.
The company doubled its South African bond programme registered on the Johannesburg Stock Exchange to R20bn in September.
“There is no intention to increase the South African debt by R10bn in the near term,’’ MTN’s Kershaw said. “We don’t need it to increase our absolute debt capacity. We would rather use it to avoid lumpy payments and restructure our shorter-term facilities at the banks.’’
The company this month reported its first annual loss, mostly as the result of a 330bn naira (R13.55bn) fine in Nigeria and foreign-exchange losses at some of its 22 operations across Africa and the Middle East.
The Nigerian penalty, which MTN agreed to settle in June following eight months of negotiations, led to a management overhaul, and a new chief executive, former Vodafone Group executive Rob Shuter, who joins the company this month.
MTN extracted €893m (R13.55bn) from Iran and expects the last of the cash that was stuck in the country for five years due to sanctions will be received by September, it said on March 2. – Bloomberg