Kenya: Telkom Kenya in Forex Swap Talks

Mergers, Acquisitions and Financial Results

Telkom Kenya is expected to make a major move in the market that could see it make a multi-billion forex swap or wrap up a refinancing arrangement.

Players in the process said a deal was still in the discussion stages but is set to mature in the coming quarter. The decision on the Sh8 billion facility was initially expected to be completed in the first quarter of 2010.

In essence, the telecommunications firm is seeking to convert its hard currency exposure into shilling liability given that the bulk of its earnings are in the domestic currency. That effectively shields it from forex fluctuations which have cost a number of Kenyan companies dearly.

Standard Chartered is steering the process. Its regional head of capital markets Salmon Kitololo told the Nation that one option on the table was arranging a forex swap. The matter has been subject of consultation including with Telkom majority shareholder, France Telecom.

Originally, the Sh8 billion was a six-month bridging loan later refinanced by the shareholders of the firm, who include Alcazar Capital, forcing a cancellation of a second leg of financing. That meant translating the indebtedness into euros.

If the promoters settle for local banks, arrangement may come in form of a syndicated loan or a corporate bond issue. Standard Chartered has previously handled huge corporate debt instruments including the Kenya Power and Lighting Company five-year Sh7 billion as the mandated lead arranger.

This was the first underwritten (by the bank) shilling-denominated bond locally. "We were committing ourselves to give the participants the comfort," said Mr Kitololo. The firm also played a similar role in the MTN Uganda $100 million syndicated loan facility.

Much recently, Standard Chartered was involved in the oil market Total Sh4.6 billion-syndicated loan facility meant to finance the takeover of the Chevron Kenya assets. Previously, the corporate finance division was run out of London before relocating to Nairobi.

Daily Nation