News From Telecom World

GrameenPhone mobilises $60m thru’ bond

Posted on: November 11, 2008

Grameenphone, the cell phone company, has mobilised about US$60 million (Tk 4.25 billion) by issuing a privately-placed bond in a move to partially cut back on its short-term borrowing, bankers said.

The country’s biggest mobile telephony firm will potentially refinance a portion of its short-term debt, estimated at $120 million as the company looks to be listed on stock markets next year, they said.

In its proposal to investors, the company said it would not incur ‘additional debt’ with the bond as existing short-term credit will be refinanced to reduce liquidity risks and better match the assets-liability profile of the company.

Grameenphone, however, declined to be quoted for this report.

In a recent business conference, Anders Jensen, the company’s chief executive, rued over the lack of liquidity for local corporations.

Financial analysts saw the mobile operator’s move from a positive angle, saying it is a prudent plan to raise funds through issuing bond, rather than allowing costly, short-term credit to pile-up.

“It’s a good business strategy to raise funds by issuing bond as short-term borrowing is expensive,” said Ifty Islam, a managing partner at Asian Tigers Capital, a Dhaka-based private equity firm.

A banker who closely follows Grameenphone said government restrictions to bring in foreign financing forced the company to increasingly rely on domestic funds.

Back in 2005, Grameenphone negotiated a financing package for US$320 million through Standard Chartered Bank that also included a slice of syndicated lending in local currency.

But government restrictions insulated the company from taking out foreign credits, committed mostly by the Norfund, International Finance Corporation and EKN.

Bankers told the FE that AK Khan & Company Limited, a local corporate, lent out the biggest amount, putting Tk 1.5 billion into the bond, a debt instrument.

A banker involved in the process said nearly one-third of total funds came from AK Khan & Company Limited, which is currently saddled with huge cash after selling off its entire stake in AKTEL to the top Japanese mobile operator-Do Co Mo-for $350 million.

AK Khan had 30 per cent share in the country’s third largest mobile operator, majority controlled by Telecom Malaysia.

AK Khan’s investment in the corporate bond is considered the first since it sold-off its shares in AKTEL to the Japanese company, managing director of the company said.

“We’re just lending … GP will be offering better terms than banks,” Mr Khan told the FE.

Citibank NA acted as the placement agent and lead arranger for the bond issuance, but did not contribute to the investment.

Other institutional investors include Prime Bank, Brac Bank, City Bank, IDCOL, SABINCO, Pubali Bank, Mercantile Bank, Delta Life Insurance Company and Eastern Bank,

With 14.5 per cent fixed interest rate, the ‘unsecured’ and ‘non-convertible’ bond, is the ninth corporate bond in Bangladesh.

Bangladesh’s bond market, at 12 per cent of GDP, is the smallest in South Asia, with banking assets dominating the financial sector, according to the World Bank.

The World Bank, in an unpublished report, said the eight corporate bonds were issued through private placement partly because of the public’s ‘little confidence’ in corporate debt as stemming from the large-scale default of publicly offered corporate bonds in the financial market’s recent history.

Mr Islam, formerly of Citigroup, said there is not ‘much risks’ linked to the bond issuance for a large company like Grameenphone.

AKM Abdullah, a financial specialist at the World Bank, echoed similar views, saying the risks on both ends are minimal, given the period of bond maturity and the reputation of the company.

He, however, said the challenge on part of the company is to gain investors’ confidence and ensure timely repayment, thus leaving a good legacy in the local financial market.

Mr Abdulla also said investors’ ability to transfer bonds would be limited as there existed no active trading market.

GP, which launched its operation in 1997, roped in 17.81 million users as of March 31, 2008 and controls 46 per cent of the market share.

GP, 62 per cent owned by Norwegian Telenor which logged in $19.06 billion in revenues last year, became the largest company last year.

Source: Financial Express

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