Bond Issue to Fund MTN’s Capex Plans

Johannesburg – The market endorsed MTN’s management team as Africa’s largest cellular operator by sales raised a $1 billion (about R14bn) bond to be used towards funding capital expenditure plans despite being rocked by many problems in the past year.

MTN said last week that the proceeds of the bond issue comprising $500 million over five years and the 10-year notes of $500m would be used to fund capital expenditure, pay down working capital facilities, and for general corporate purposes.

File picture: Afolabi Sotunde. Credit: REUTERS

MTN priced the five-year notes, which mature in February 2022, at 5.373 percent and the notes maturing in October 2026 at 6.5 percent . These would be listed on the Irish Stock Exchange and the issue would be settled on Thursday.


S&P Global Ratings earlier this month downgraded MTN’s long-term credit ratings to junk following the company’s recent difficulties in repatriating cash from key markets and a weakening macro environment in these markets.

MTN is under pressure to raise funds for capital expenditure after reporting its first half-year loss, partly caused by an agreement to settle R14.46bn, or 330 billion naira, fine with Nigerian regulators.

Nigerian regulators slapped MTN with the record fine for failing to disconnect 5 million unregistered SIM cards. Its subscriber base of 233 million was stagnant in the six months to June, and it was struggling to repatriate R15.4bn from its Iran subsidiary.

Ron Klipin, a portfolio manager at Cratos Wealth, said the fact that MTN had managed to raise $1bn in a bond sale to fund capital expenditure signalled that the company could be turning its fortunes around following the Nigerian woes.

“The raising of the $1bn bond is a start, and it means that the company could begin de-gearing. MTN may still need additional funding, in the form of a listing Nigeria,” Klipin said, adding that the 20-year-old company had become a risky investment due to too many uncertainties.

“The MTN share has been hammered, which is among the associated risks in terms of getting money out of Nigeria, as well as the uncertainty of additional fines. However, here is hope that the new management will help turn the ship around.”

MTN denied claims last week that it had illegally repatriated $13.92bn out of Nigeria over a period of 10 years in collusion with a number of commercial banks.

Denis Smit, the managing director of BMI-TechKnowledge, said on Friday that the fact MTN had managed to raise $1bn despite having had a tough two years was a positive sign for the company.

“It is interesting that they they raised money despite being downgraded to junk status – and is good for them as it shows faith in the MTN management team,” he said.

“MTN has put together a strong management team, it is only a matter of time until it turns around,” Smit said.

The company named Netherland-based Vodafone executive Rob Shuter as its new chief executive after the Nigerian fine.

MTN shares rose 0.76 percent on the JSE on Friday to close at R115.37.

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