MTN has paid down R6.5bn in debt as it further reins in its borrowings, particularly foreign-denominated debt.
In line with its strategy to deleverage nonrand debt faster and its medium-term target to maintain group or holding company leverage below 1.5-times, Africa’s largest mobile operator issued a cash offer to eligible holders for the $450m it has left of its original $750m 4.755% notes due in November 2024.
The offer was announced on November 7 and closed on November 14.
A corporate bond is a debt instrument issued by a company. When investors buy a corporate bond, they are essentially lending money to the company. In return, the company agrees to pay the investor a fixed or variable interest rate over a specified period, and to repay the principal amount of the loan at maturity.
On Friday, MTN said it received valid tenders of $353.1m (R6.489bn), “including accrued interest payments, for purchase and will accept for purchase all notes tendered”. This was due to be settled on November 16.
The move is part of the group’s broader effort, dubbed “Ambition 2025”, premised on reducing debt, exiting operations in the Middle East and growing new business areas.
As part of the effort, the group has shifted to reducing foreign-denominated debt, which has weighed on a number of large SA corporates due to a weaker rand. A weaker rand makes it more expensive to pay back international debt and suppliers.
MTN reported that its net debt to earnings before interest, tax, depreciation and amortisation (ebitda) ratio, which measures a company’s ability to pay off its debt, stood at 0.5-times by the end of the nine-month period to end-September, compared with 0.4-times by the half-year in June. It thus remained well within its loan covenant limit of 2.5 times, the company said.
“The early settlement of non-rand debt significantly enhances the profile and flexibility of the group’s holding company balance sheet, reducing its exposure to foreign exchange volatility,” said the group.
Factoring in the early settlement, holding company leverage would remain largely unchanged at 1.5-times, but the ratio of nonrand to rand-denominated debt would improve to 24:76, compared with 37:63 as reported at the end of the third quarter.
Altogether $96.9m in Eurobond Notes now remain outstanding after the settlement.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.