MTN Group, Africa's largest mobile-phone company by sales, is engaging with international investors to explore a potential bond offering. This initiative follows the company's first-ever half-year loss and is intended to raise funds for capital expenditures, dividend payments, and to cover a record 330 billion naira (approximately $1 billion) fine imposed by Nigerian regulators. Barclays Bank Plc, Bank of America Corporation's Merrill Lynch, Citigroup, and Standard Bank Group have been appointed to arrange investor meetings, with a bond offering expected to follow, subject to market conditions.
The bond offering aims to secure over $1 billion through the sale of two dollar bonds, marking MTN's first return to the Eurobond market since 2014. The company is reportedly seeking at least $500 million from a five-year bond and another $500 million from a 10-year bond. Initial yield guidance for the five-year note is between 5.375% and 5.5%, while the 10-year bond is being marketed at approximately 6.5%. This move is seen as necessary as the company's pre-dividend free cash flow is insufficient to cover dividend payments and the Nigerian fine for the current year and 2017, according to an analyst at Gimme Credit.
MTN's capital expenditure is projected to increase in Nigeria and South Africa in the coming years. The company also faces challenges repatriating $1.1 billion tied up in its Iran unit. The shares of MTN have declined significantly since the Nigerian fine was first reported, dropping about 38% since October 26. Despite this, an analyst from Gimme Credit suggests that it is a favorable time for MTN to issue bonds, capitalizing on a strong demand for emerging-market corporate debt in a low-yield environment. MTN also recently raised over $1.3 billion in loans from local and international banks prior to these bond sale discussions.
