African Telecoms Deal of the Year 2001-Safaricom
Kenya's Safaricom deal features the first ECA-backed local currency
project bond ever to have been issued ? it is the largest
non-governmental bond issue with the longest tenor to date in the
history of the Kenyan capital markets.
It also brings in large quantities of foreign currency into the country through a term loan from a club of international banks. 70% of the financing package is in local currency, creating a natural currency hedge for the project. Given this list of firsts, the transaction has become the benchmark for future capital markets issues in Kenya.
GSM operator Safaricom is a joint venture between Vodafone Kenya (40%) and Telekom Kenya (60%). The current deal finances Siemens equipment, produced in Belgium, for the roll out of Safaricom's network.
Financing comprises KSh 4 billion ($51.1 million equivalent) in five-year floating rate notes, and an Eu25 million six-year loan. The bonds mature on March 31, 2006 and the term loan on March 31, 2007. Lead arranging the six-year loan are Citibank, Barclays, KBC and Standard Chartered. All are on the same ticket with a 125bp participation fee.
The commercial loan is priced at 150bp above Euribor during the availability period, thereafter reducing to 125bp if debt service cover ratio (DSCR) is greater than 1.5x for two consecutive quarters. It returns to 150bp if DSCR is less than 1.5x.
Citibank provided a 75% guarantee on the notes; the balance is secured by a debenture over Safaricom assets. Citibank, financial adviser to the sponsors, in turn was covered by a local currency denominated insurance policy provided by Office National du Ducroire (OND), the Belgian government's export credit agency. The latter is providing 75% comprehensive cover for both facilities and a further 22.5% PRI for the term loan. The OND coverage insured Siemens ATEA's exports from Belgium.
The notes are priced at 100bp over the 91-day Kenyan Treasury Bill. They attracted significant commitments from local investors ? 85% of the issue was committed prior to the retail distribution launch, which closed fully subscribed on 11 June 2001. The notes were issued on the Nairobi Stock Exchange. Much of the appeal for the notes lies in their existence as a separate asset class to the 91-day treasury bills typically offered by the government. But following this launch, the Kenyan government was even able to extend the maturity on a debt issue of its own
Mobile telephony has grown exponentially ? over 256% in the first year since liberalization. During this time Safaricom increased its subscribers from 20,000 to 320,000.
It also brings in large quantities of foreign currency into the country through a term loan from a club of international banks. 70% of the financing package is in local currency, creating a natural currency hedge for the project. Given this list of firsts, the transaction has become the benchmark for future capital markets issues in Kenya.
GSM operator Safaricom is a joint venture between Vodafone Kenya (40%) and Telekom Kenya (60%). The current deal finances Siemens equipment, produced in Belgium, for the roll out of Safaricom's network.
Financing comprises KSh 4 billion ($51.1 million equivalent) in five-year floating rate notes, and an Eu25 million six-year loan. The bonds mature on March 31, 2006 and the term loan on March 31, 2007. Lead arranging the six-year loan are Citibank, Barclays, KBC and Standard Chartered. All are on the same ticket with a 125bp participation fee.
The commercial loan is priced at 150bp above Euribor during the availability period, thereafter reducing to 125bp if debt service cover ratio (DSCR) is greater than 1.5x for two consecutive quarters. It returns to 150bp if DSCR is less than 1.5x.
Citibank provided a 75% guarantee on the notes; the balance is secured by a debenture over Safaricom assets. Citibank, financial adviser to the sponsors, in turn was covered by a local currency denominated insurance policy provided by Office National du Ducroire (OND), the Belgian government's export credit agency. The latter is providing 75% comprehensive cover for both facilities and a further 22.5% PRI for the term loan. The OND coverage insured Siemens ATEA's exports from Belgium.
The notes are priced at 100bp over the 91-day Kenyan Treasury Bill. They attracted significant commitments from local investors ? 85% of the issue was committed prior to the retail distribution launch, which closed fully subscribed on 11 June 2001. The notes were issued on the Nairobi Stock Exchange. Much of the appeal for the notes lies in their existence as a separate asset class to the 91-day treasury bills typically offered by the government. But following this launch, the Kenyan government was even able to extend the maturity on a debt issue of its own
Mobile telephony has grown exponentially ? over 256% in the first year since liberalization. During this time Safaricom increased its subscribers from 20,000 to 320,000.
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