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Bharti-Zain deal near financial closure

Bharti has issued terms for the the Zain acquisition (read more here). From Mint:

India’s Bharti Airtel, in talks to buy the African mobile operations of Kuwait’s Zain for $9 billion, has issued a term sheet to banks to raise up to $8.5 billion in offshore loans to fund the deal, banking sources said.

The six-year offshore facility has four tranches and carries a blended average life of 4.75 years, with a margin ranging from 176 basis points (bps) to 179 bps over Libor, the sources said.

Previously, Bharti was said to be looking for a $9 billion facility, which also included an onshore rupee tranche.

Bankers familiar with the deal said that the all-in pricing is below all expectations, which ranged from 200 bps to 250 bps above Libor.

We don’t know what Libor they speak of, but current 1-year Libor rates are 0.87%. So this will be a really cheap loan.

Additionally, some of this loan may actually replace existing loans taken by Zain, upto $4bn of it, so says Mint. That means the new loan is only $5bn, which at the 3% rate they are getting above, will translate to $150 million – no great shakes. EBIDTA is at $1.2 bn currently – all they have to do is improve EBIDTA by 10% and they’re home.

Bharti is bidding for 3G spectrum too in India, and that will also need to get funded.

This might just be it. I mean a trigger for a great story going ahead too – the fundamentals look very good in the medium term. But they are fundamentals – by that I mean we don’t know the details, and the devil is there. Even with all this news – and a new relative market high today – Bharti didn’t move up; does that mean the institutions know something you and I don’t? Why doesn’t price follow?

In the short term, Bharti is a buy. In the medium term, on fundamentals alone, it’s a buy. The price-action needs to follow through and show some serious volume. I don’t even know how to begin predicting for the long term so I won’t bother.

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The chart shows some consolidation with low volume – that is usually a sign of a breakout or breakdown waiting to happen. That big bar towards the end is what happens if you rely purely on NSE data. There was probably a freak tick at 230.

  • Stock Market Complaints says:

    >Its heartening to know that Indian Companies are now spreading wings. Bharti will become the world’s fifth largest operator spread in 18 countries. It will get 42 Million new subscribers in 15 African Countries. But its taking on additional financial burden of US$10.7 Billion! Most of the African Markets taken over by Bharti are running at heavy loss. Unless the Company turns around the loss making markets, quickly, share holders who have contributed to the rapid growth of the Company will be badly affected . http://www.complaints-india.com