Econet Wireless closes syndicated deal
Mauritius company Econet Wireless (EWG) has closed a US$362mn syndicated loan to expand its operations in Zimbabwe and Burundi.
The deal is composed of a US$130mn syndicated facility arranged by Afreximbank, to be used in both subsidiaries, and a US$232 public-private tranche reserved for the company’s Zimbabwe business.
Afreximbank provided US$63mn for the first syndicated loan, with the remainder extended by European development finance institutions (DEG, FMO and Proparco, who contributed US$20mn each), and Zimbabwean banks Commercial Bank of Zimbabwe (US$5mn) and TN (US$2mn).
The facility was lent to Econet’s parent company in Mauritius to avoid complications related to the regulatory systems and risk ratings of Burundi and Zimbabwe. EWG in Mauritius then extended intra-group loans of US$99mn and US$31mn respectively to its Zimbabwe and Burundi subsidiaries.
An unsecured guarantee was given by Econet Investments Limited (EIL), another EWG group member, to cover the risk that Econet’s operating licence in Zimbabwe would not be renewed after it expired in July 2013. It will be removed once the required security coverage ratio is achieved by the Zimbabwe and Burundi assets alone.
Afreximbank was advised by Clyde and Co to complete the transaction, while EWG used the services of Hogan Lovells.
Of the public-private tranche, the China Development Bank (CDB) extended US$135mn, Ericsson US$57mn, the Industrial Development Corporation of South Africa (IDC) US$20mn and the Eastern and South African Trade and Development Bank (PTA) US$20mn.
As Econet had already agreed to give security to the Afreximbank syndicate over all the assets of its Zimbabwe operations when it signed the second tranche, a security sharing solution had to be developed, whereby Afreximbank would hold the security for the benefit of all lenders.
TN Bank and Barclays in Zimbabwe were appointed as local administrative agents and local account banks, managing debt service cash flows.
The loans will help Econet finance new purchases of equipment from Ericsson in Sweden and ZTE in China to expand its network in Burundi and Zimbabwe. The company currently has a 70% market share in Zimbabwe, while its Burundi operation has yet to generate a profit.