Axiom Telecom broadens outlook

in June last year, Axiom Telecom, one of the Middle East’s leading telecoms retailers, reined in JP Morgan, Emirates NBD International and Dubai Islamic Bank as mandated lead arrangers for a US$400mn syndicated finance facility to fund its expansion plans. The deal established benchmark pricing for standalone corporates in the region, and most notably, was oversubscribed.

The MLAs closed the innovative and comprehensive purchase financing facility amongst eight participating banks, including First Gulf Bank, Noor Islamic Bank as lead arranger, Commercial Bank of Dubai as arranger and Emirates Islamic Bank and United Bank as co-arrangers.

Axiom is a leading mobile phone retailer, distributor and content provider in the region, specialising in wireless communication products.

Since its inception in 1997, the company has expanded its presence within the UAE, Saudi Arabia, Bahrain, Qatar, Kuwait, Egypt, India and the UK. It is the company’s goal to expand its operations through organic growth and strategic partnerships.
This facility has enabled Axiom to consolidate its position within the UAE and broaden its outlook in new markets. “In line with our regional and global growth strategy, this syndication will support our plans and create a strong partnership between Axiom and key banks regionally and globally,” says Faisal Al Bannai, CEO of Axiom Telecom.

With a conventional loan of US$235mn and an Islamic loan of AED605mn, the facility refinanced a US$100mn bridge financing facility undertaken by JP Morgan, and replaced all of Axiom’s current import and purchase finance facilities. The innovative structure of the deal was widely noted by the Middle Eastern business media.

The structure of financing the import of a variety of telecommunications equipment from pre-selected suppliers to one of the most aggressive growth retailers in the Middle East meant that the borrower could efficiently and economically replace all of its bilateral standby letter of credit (SBCL) facilities with one coordinated syndicated 18-month facility. It was also one of the first transactions in the region to incorporate AED and US$ tranches with conventional and Islamic banking structures.

During structuring negotiations for the debut borrowing, JP Morgan financed a standalone bridge facility to ensure minimum disruption to Axiom’s current business flow, and enable a smooth transition into the new committed finance facility.

As lead arranger, underwriter and bookrunner, JP Morgan was at the heart of negotiations that enabled Axiom, to raise the finance facility.

Jeremy Shaw managing director, global trade at of JP Morgan comments: “To structure the transaction, a significant amount of local due diligence was undertaken by JP Morgan’s global client and risk management (GCRM) team who, working in close co-ordination with JP Morgan’s trade distribution desk in London, ensured that the bank was able to successfully close an oversubscribed transaction in a challenging market.”

Shaw points to another noteworthy feature of the deal. “This facility is extendable. There’s no need to renegotiate documents.”

Dubai Islamic Bank took the role of lead arranger, underwriter and bookrunner for the Islamic tranche of the deal. “For this first of its kind Islamic working capital syndication facility, which is revolving in nature, we did not limit our involvement merely to participate in the syndicate,” says Arshad Husain, corporate banking – Dubai, at Dubai Islamic Bank (DIB).

“This landmark financing arrangement with Axiom combines our traditional strength in Islamic financing and ability to offer multi-faceted financing solutions to our customers. We have used an innovative combination of sharikat el melk (co-ownership) and wakala (agency)/murabaha (sale and purchase), a unique and customised structure. This transaction is an important development to maximise the profile and reach of DIB’s sharia compliant products.”

Deal Information

Borrower: Axiom Telecom
Amount: US$400mn
Mandated lead arrangers: JP Morgan; Emirates NDB; Dubai Islamic Bank
Additional lenders: First Gulf Bank; Noor Islamic Bank; Commercial Bank of Dubai; Emirates Islamic Bank United Bank
Law firms: Allen & Overy; Clifford Chance
Tenor: 18 months revolving
Date signed: June 2008