Vmobile: Open funding

The $1.1 billion Vmobile Nigeria financing – the largest ever for a telecoms operator in the country, and the largest project financing outside the oil and gas sector – is unique in Africa: a multi-sourced and multi-currency borrowing base programme sourced from commercial, multilateral/ECA and vendor finance lenders with a common terms agreement (CTA) that allows new lenders in and out of the deal without causing the existing lenders problems.

Vmobile Nigeria is the second largest GSM operator in Nigeria with more than three million active subscribers. The debt financing will be used to drive Vmobile's aggressive network rollout and support its ongoing coverage expansion programme – Project ROSE – across the country.

Vmobile Nigeria announced plans last year to invest a minimum of $2 billion in Project ROSE, targeted at increasing base station sites to more than 3,000, building a 10 million subscriber network capacity and providing 4,000km of Transmission Microwave Backbone.

Since the launch of Project ROSE, Vmobile Nigeria has enhanced its network capacity with the aggressive installations of base stations across the country, the commissioning of its East-West as well as North–South Microwave Backbone Transmission, building over six million subscriber network capacity and connecting over four million subscribers.

The Vmobile global financing documents were executed on 16 September 2005, but the deal closed on 20 December with around $700 million in onshore and offshore debt and a further $400 million in offshore debt to come in a t a later stage.

Structured by Standard Chartered (global co-ordinating bank), the borrowing vehicle is open-ended up to a max of $1.1 billion and features a Security Trust Deed that gives pari-passu interest in the assets of VMobile to existing and future senior lenders.

The financing breaks down into four basic tranches: a $100 million 36-month receivables backed equipment financing co-arranged by Standard Chartered, Afreximbank, Rand Merchant Bank and Barclays; a $250 million ECA-backed facility underwritten by Standard Chartered; a 72-month debt refinancing of up to $447 million from local Nigerian lenders; and a $630 million vendor facility from Ericsson, Huawei, Motorola and Harris that will fully fund with time.

Of the vendor tranche, to date Nordea is lender of record on a $51 million Ericsson vendor finance facility that also benefits from political risk insurance extended by EKN, while MIGA insures Ericsson's direct tranche of $48 million. Ericsson Nigeria is also financing a third vendor tranche of between $45 million and $50 million.

The local tranche – 125% oversubscribed – includes First Bank, Guaranty Trust Bank and Zenith Bank as co-ordinating onshore arrangers and advisers, as well as Afribank, Wema Bank, National Bank, Intercontinental Bank, UBA, Ecobank, Lead Bank, Access Bank, Oceanic International Bank, MBC International Bank, First City Monument Bank, EIB International Bank and Kakawa Discount House.

Pricing has not been released but precedents for the local debt priced at around 400-500bp.
Vmobile is expected to digest its current funding in two years and will almost certainly be back in the market as mobile penetration in Nigeria continues to rise.

Its latest deal has brought a diversity of borrowing base not seen before on Nigerian deals outside oil and gas and may yet be broadened further – the African Development Bank is rumoured to be looking at taking a piece of the deal.

Vmobile Nigeria
Status: Closed 20 December 2005
Description: Multisourced Nigerian telecoms financing – largest in Nigeria to date
Size: $1.1 billion
Sponsor: Vmobile Nigeria
Onshore arrangers: First Bank, Guaranty Trust Bank, Zenith Bank
Offshore arrangers: Afrex-Im, Standard Chartered, Barclays, Rand Merchant Bank, Nordea Bank, Ericsson Credit
Multilateral support: EKN, MIGA
Legal counsel sponsor: Allen & Overy (international), Olaniwun Ajayi & Co (local)
Legal counsel to lenders: Watson, Farley & Williams (international), The Law Union (local)