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Bharti secures funds to buy Zain

By Agencies

India’s largest telco Bharti Airtel has tied up US$ 8.3 billion from a clutch of foreign banks and State Bank of India to fund the acquisition of Zain telecom’s African assets.

“Bharti Airtel is pleased to announce that the entire financing requirement of $ 8.3 billion for the proposed acquisition of Zain’s African unit (Zain Africa BV) has been successfully tied up,” the company said in a statement on March 21.

“Financing was oversubscribed, with major international banks committing to underwrite the total amount,” the statement added.

Bharti’s lead-arranger and lead-advisor Standard Chartered Bank has committed the highest amount at US$ 1.3 billion followed by US$ 0.9 billion by Barclays, sources close to the development said, adding both have more capacity to underwrite, if required.

The rest of the co-advisors–ANZ,BNP, Bank of America-Merrill Lynch, Credit Agricole CIB, DBS, HSBC, Bank of Tokyo-Mitsubishi UFJ and Sumitomo Mitsui Banking Corporation–have allocated US$ 600 million each, the company added.

Bharti Airtel and Kuwait’s Zain are into exclusive discussions until March 25, for the acquisition of Zain’s African unit, based on an enterprise value of US$ 10.7 billion.

This proposed transaction does not include Zain’s operations in Morocco and Sudan and remains subject to due diligence, customary regulatory approvals and signing of the final transaction documentation.

In all, US$ 7.5 billion debt would be dollar-denominated and the remaining about $ 1 billion will be in rupee loan.

In addition to the dollar financing, the SBI Group has committed up to US$ 1 billion equivalent rupee loan to Bharti which will also cover any associated transaction costs, the company said.

Global Investment House KSCC is serving as the regional financial advisor on this transaction, Bharti said.

Bharti has over 125 million subscribers in India and if the deal goes through, the company would have a major footprint in the African market and would get access to over 40 million customers of Zain in the continent.

Sources said the Bharti board, which met on March 20, is understood to have discussed the progress on the Zain acquisition, including the funding requirements.

Bharti had earlier said the total agreed enterprise valuation of US$ 10.7 billion is likely to result in a total payout of around US$ 9 billion (which includes any loans payable by the operating companies to the Zain Group) based on the estimated net debt of about $ 1.7 billion as on December 31, 2009.

It has been agreed that $ 700 million out of the total payable amount would be paid after one-year from closing.

The parties have also agreed to a break-fee of $ 150 million payable by either side on terms and conditions customary to a deal of this nature and size.


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