VSNL's South African Arm, Neotel Secures Rs 1300 Crore Debt Facility

Videsh Sanchar Nigam Ltd (VSNL) has announced that Neotel, South Africa’s second fixed line operator, has announced that it has signed a Rs 1300 Crore bridging debt facility with a funding consortium of South African financial institutions.

The facility has been fully underwritten by the funding consortium comprising Nedbank Capital, the investment banking business of the Nedbank Group, Investec Bank Ltd and the Development Bank of Southern Africa. The consortium will jointly finance Rs 900 Crore of the debt, while a further Rs 400 Crore will be financed by the Industrial Development Corporation of South Africa.

The debt will be provided on a project finance basis with a term of 18 months. This is the largest non-recourse facility for a start-up telecommunications project in the region, and one of the largest in South Africa to date. Attractive terms for the debt have been offered by the financial institutions to ensure that Neotel is allowed adequate time to establish itself in the market.

Neotel will re-finance the debt with a long-term facility after 12 months. Nedbank Capital, Investec and the Development Bank of South Africa have been appointed as the mandated lead arrangers for the long-term facility, which will be in excess of Rs 2600 Crore. The debt is complemented by in excess of Rs 1300 Crore of equity that will be contributed by the Neotel shareholders.

The funds will be utilized for Neotel's network build out. The Neotel network already consists of 1,300 km of optic fiber cable in the 6 main metropolitan areas. This infrastructure was purchased from Transnet for Rs 165 Crore earlier this year.

Neotel currently offers international voice and data transit services for other telecommunications operators. The roll out of additional services is on track and initial enterprise services will be available in December this year. Consumer services in select geographic areas will be offered in April/May 2007.

Ajay Pandey, Managing Director of Neotel, said that he was delighted to have Neotel partner with such a reputable funding consortium. The finalization of the funding ensures that Neotel continues to remain on track with the roll out of its promised services.

Nedbank Capital, Investec and the Development Bank of South Africa added that they were very pleased to be participating in an innovative and flexible funding structure that is responsive to the needs of Neotel and its shareholders. The consortium added that they believe that Neotel will bring world-class telecommunication innovation to South Africa through the roll-out of a next generation network coupled with the involvement of VSNL of India, one of the world's leading telecommunications service providers.

Kagiso Financial Services, in association with Rothschild South Africa, has acted as financial advisers to Neotel. The legal advisor to Neotel is Deneys Reitz, while Bell Dewar & Hall have acted on behalf of the funding institutions.

Source : Equity Bulls

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