Four banks to join Bharti loan syndication

Four banks to join Bharti loan syndication

Mumbai: At least four more banks are slated to join the core group of lenders that syndicated a $7.5 billion (around Rs35,475 crore) loan for Bharti Airtel Ltd, India’s largest mobile telephony firm by subscribers, to acquire the African asset of Kuwaiti Mobile Telecommunications Co. KSC (Zain), according to an official of Standard Chartered Bank Plc (StanChart), the lead arranger of the loan.

State Bank of India on Thursday closed its $1 billion five year overseas bond at 260 basis points over Libor, an investment banker said. Away in New York on a road show for the loan, SBI chairman OP Bhatt could not be contacted.

This will take the total syndicators to 15 from the present 11.

Between them, the members of the syndication will buy around $1 billion from the existing syndicators. While the amount of loan already raised remains the same, with the entry of new members, the existing members of the syndication will be able to bring down their exposure to the loan proportionately.

This is not a sell-down of a loan to other banks but an expansion of the core group of syndicators, known as “mandated lead arrangers".

StanChart had underwritten $1.3 billion and Barclays Plc $900 million. The other syndicate members are Australia and New Zealand Banking Group Ltd, BNP Paribas SA, Bank of America Merrill Lynch, Credit Agricole CIB, DBS Bank Ltd, Hongkong and Shanghai Banking Corp. Ltd, Bank of Tokyo-Mitsubishi UFJ Ltd, Sumitomo Mitsui Banking Corp. and State Bank of India.

Intesa Sanpaolo SpA committed $400 million on Wednesday. Deutsche Bank AG, too, has committed $300 million towards the syndication. At least two other multinational banks are expected to join the syndication within three weeks with at least $300 million and become part of the mandated lead arrangers, Charles Corbett, managing director and head of syndication for South Asia, StanChart, said.

Mint did not reach out to Intesa Sanpaolo and Deutsche Bank.

According to Corbett, the pricing of the loan has been at the “original mandated price or less than that".

The loan was raised at 195 basis points over the London interbank offered rate (Libor) for a tenure of six years. Libor is the international benchmark for loans. The average maturity period of the loan is 4.7 years and the first principal outgo will be after 2.5 years. The annual interest payment on account of the loan will be $200 million.

Bharti Airtel in June closed the deal with Zain for $9 billion. Including the loans taken for Zain and the licence fee paid for 3G telecom licences and broadband, the consolidated debt of the company is $12 billion, its officials said in a teleconference with analysts on 14 July.

Concerned with the debt profile of Bharti Airtel, rating agency Standard and Poor’s put Bharti Airtel’s long-term debt rating under credit watch in February and subsequently downgraded it by one notch to BB+ from BBB-, the lowest investment grade. BB+ is considered the highest speculative grade. “A rating action may affect the bond holders and not the syndicators of the loans. It has next to no impact at all on syndicators," said Corbett.

According to Corbett, the latest development will encourage other players to come into the general syndication.

Typically, banks that form a syndicate take the loans on their books at the first stage. At the second stage, they sell down part of it to other banks at a price which is higher than what they had paid, and make some profit in the process. In this case, they have not yet sold down part of the loan. Instead, they are expanding the group that syndicated the loan.