Bharti Airtel has said it will repay 10 per cent of the amount borrowed from a consortium of eleven banks, led by Standard Chartered, Bank of America Merrill Lynch and Barclays, according to news reports. The banks are facing mark-to-market losses of around $225 million on debt related to funding of Bharti Airtel?s acquisition of Zain. The spread on debt, similar to that of Bharti, has widened to about 250 basis points over the London Interbank Offered Rate (Libor), a benchmark on global lending.
The widening paper losses on Bharti?s debt have prompted banks to seek at least partial prepayment from the firm, or reset the interest rates that could help banks cut losses. In a statement, the operator has stated that it had entered into a long-term financing arrangement with flexibility of prepayments built in as part of the loan agreement. The company added that it has seen significant free cash flows over the past few quarters and thus feels this is right time to use these and other related means to optimise the mix and cost of financing. Bharti Airtel intends to make a prepayment of $800-900 million in this quarter.
Banks who funded the $9-billion acquisition of Zain Africa are not finding buyers for the loan to sell down, as yields demanded by investors have risen since the recovery has boosted demand for funds, say news reports. Zain Africa had debt of $1.6 billion at the time of purchase, taking its value to $9 billion. The $7.5 billion was raised through the consortium that included ANZ Banking, BNP Paribas , Bank of America Merrill Lynch, Credit Agricole , DBS Bank , HSBC , Bank of Tokyo-Mitsubishi , Sumitomo Mitsui Banking and State Bank of India , apart from Standard Chartered and Barclays.
