Ojer Telekommunikasyon: Temporary flex

Towards the end of 2006, ABN Amro, Citigroup, Fortis, ING and Libyan bank Bank Med arranged a $2.075 billion facility for Ojer Telekommunikasyon – Turk Telekom. The deal is notable for emerging from Turkey's financial crisis in mid-2006 unscathed and for attracting a group of close to 30 banks in syndication as a precursor to a longer-dated take out facility that is due to close late in 2007.

In 2005, Oger Telekom of Saudi Arabia paid Eu5.6 billion for a 55% stake in Turk Telekom and was last year under pressure from the licensor to speed up its investment in the company as stipulated by the terms of the sale.

To finance the acquisition, Oger Telekom used the deferred payment plan offered by the government that allowed OTAS to pay 20% of the purchase price ($1.31 billion) upfront with the 80% balance ($4.48 billion) payable in five equal installments.

The loan is split into a $1.425 billion letter of guarantee, a $600 million term loan and a $50 million revolver. All tranches have tenors of two years and three months. The proceeds pay for the two next installments under the deferred payment scheme.

The margin for the term loan at launch was 310bp, reflecting mini-crisis in Turkey at the time when the Lira was at historic lows. Once out in the market, the margin – reflecting the quality of the underlying assets and the domestic economic recovery – was reversed flexed to 250bp.

This deal serves as an interim financing solution ahead of a $3.7 billion long term financing that Citigroup, ABN Amro, Calyon, BNP Paribas and Fortis have underwritten and is expected to close by the end of 2007.

An earlier 15-month letter of guarantee facility was agreed in November 2005, arranged by ABN Amro and Citigroup on similar terms which this deal extends, although the margin was lower at 212bp over Libor. The security package consists of cash collateral, the corporate guarantee of Saudi Ojer and a pledge over shares from the acquired stake in Turk Telekom.

Saudi Oger, headquartered in Riyadh and privately-owned by the Lebanese Hariri family, is a coveted client of banks. Saudi Oger can count among its many assets a majority shareholding in lead arranger Bank Med, hence its participation.

During the past five years Saudi Oger has diversified internationally, particularly in telecoms. In 2002 Saudi Oger started the third mobile operator in South Africa (Cell-C) which now has more than 2 million subscribers. The company also owns CDMA mobile networks in Portugal, Romania (Zapp) and in Germany (Inquam).

Ojer Telekommunikasyon
Status: Closed 9 November 2006
Description: A $2.075 billion financing for payment of acquisition instalments for a 55% stake in Turk Telekom
Sponsor: Saudi Oger
Mandated lead arrangers: ABN Amro (bookrunner), Citigroup (bookrunner), ING, Fortis, Bank Med
Legal counsel to the borrower: Clifford Chance (International), Birsel (Turkish law)
Legal counsel to lenders: Allen & Overy (International), HBO (Turkish law)