MTN settles R5bn worth of bonds
The company’s share price rises 1.52% after the debt-reduction pay back news
MTN, Africa’s largest mobile operator, has paid down R5bn worth of debt as it works to further rein in its borrowings.
In August it invited eligible holders of its $750m Eurobond, due to mature in November 2024, to tender their notes for purchase by the company for cash, intending to settle $250m worth of these bonds. With the offer attracting tenders of more than $482m, the group decided to raise the final acceptance amount to $300m.
This is due to be settled on September 6, the company said.
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 areas of business.
Like a number of SA businesses with international operations, MTN has had to deal with trouble around repatriating funds from countries such as Nigeria and Iran, which contributed to difficulty in paying down its large debt bill.
Tsholofelo Molefe, MTN’s group CFO, said as the early settlement would not affect its holding company (holdco) leverage ratio of 0.8x as it would be funded from the operator’s available cash balances.
Holdco’s net debt stood at R28.4bn for the half-year to end-June 2022.
The ratio is a measure of the degree to which a company is financing its operations with debt rather than its own resources.
As part of its strategy and guidance to investors, MTN has a goal to maintain the holdco leverage below 1.5x.
By the end of 2021, the operator’s leverage was at 1x. It went down to present levels of 0.8x helped by the repatriation of R9.4bn in cash from its operating companies outside SA, including R4.5bn from MTN Nigeria.
Molefe said the move brings MTN’s dollar-denominated debt down to 35% of total holdco debt on a pro forma basis for its interim period. MTN’s dollar-denominated debt previously accounted for 42% of the total.
Given a strengthening dollar, companies such as MTN — which report their earnings in local currency — are working to reduce foreign denominated debt, so as to reduce the negative effect of a weakening rand.
MTN, which recently launched a bid to buy Telkom, saw its share price rise 1.52% to R128.41 after the debt-reduction news.