MTN Uganda secures a US$100 Million Syndicated Corporate Credit Line
MTN Uganda has secured a $100 million syndicated corporate financing facility from 11 local and regional banks in a major credit deal.
The transaction is seen as the largest syndicated corporate credit line in Uganda's banking sector that has largely focused on short term lending in previous years, leaving big borrowers starved of sufficient funds for long term lending.
The financing is denominated in the equivalent of Uganda shillings, a move that is meant to reduce exposure to foreign exchange losses arising from money market fluctuations.
The credit line was arranged by Absa Capital, the investment banking arm of Absa Bank Ltd in collaboration Barclays Bank Uganda Ltd, Standard Chartered Bank Uganda Ltd, KCB Uganda Ltd, and Stanbic Bank Uganda Ltd among others.
It was backed by Bank of Africa Uganda Ld, Citibank Uganda Ltd, United Bank of Africa, DFCU Bank Ltd, Ecobank Uganda Ltd and Orient Bank Ltd.
Funding from the credit line will be devoted towards MTN's ongoing expansion activities that include erection of masts and base stations in its bid to consolidate market leadership in the telecommunications sector.
MTN Uganda is the country's leading mobile phone services provider with an estimated 65 percent of market share equivalent to 5 million subscribers.
The credit facility is based on an innovative structure, similar to that used in the issuance of medium term notes for corporate bonds.
"The innovative structure addresses the need for strong local corporate credits in the sub Saharan Africa syndicated loan market to manage their funding needs and avoid frequent refinancing and associated costs as additional debt funding becomes available allowing corporate issuers to maintain an optimal and efficient capital structure," explained Charles Mbire, MTN Uganda chairman.
The acquisition of the syndicated loan facility comes at a time when MTN Uganda is re-investing in its operations in the wake of increased competition in the telecommunications sector that is reflected in the entry of three new players since January 2008 -- Warid Telecom, Orange Uganda and I-Telecom.
Through the financing, MTN Uganda expects to expand its network capacity, instal new infrastructure and offer new services.
Currently, competition in Uganda's mobile phone market is tilted towards low calling charges and high network quality based on few dropped calls and a consistently strong reception in all areas of coverage.
Though details of the credit transaction are still scanty, MTN Uganda is entitled to an additional $150 million in senior secured facilities on an ongoing basis, according to Marouan Selmi of Absa Capital.
The new credit line also brings MTN Uganda's total capital investment to $678million after 11 years of operation.
The East African