Etisalat seeks $12bn for Zain buy

Etisalat is finalising loan facilities worth $12 billion from a club of around 12 banks to cover the cost of its planned 46 per cent acquisition of Kuwait's Zain, banking sources close to the deal said.

Each bank will underwrite $1bn, the sources added.

Some banks had pitched underwritten offers of $5-7bn, but Etisalat, formerly known as Emirates Telecommunications Co., decided to go with a broader group, and market appetite for the loan is strong, with around 20 banks eyeing the deal, one of the bankers said.

"I think this is a sign of good liquidity generally for strong names. Etisalat is a very strong company which happens to be in Abu Dhabi, but it would have got the same response if it was in Europe or Asia," the banker said.

The Gulf's No 2 telecoms group has an A+ rating from Fitch, which said in its latest report on the company that it would not expect a borrowing of the full amount to impact that rating due to its conservative financial policy.

Among the banks pitching on the deal are Bank of Tokyo-Mitsubishi UFJ, BNP Paribas, Citigroup, Credit Agricole CIB, HSBC, Societe Generale, Standard Chartered Bank, National Bank of Abu Dhabi, National Bank of Kuwait and Royal Bank of Scotland, the bankers said.

Keen interest

European banks are taking a keen interest because the facility will be drawn -- a high volume of deals in Europe are for revolving credit facilities, with very little outstanding.

The structure is still being finalised, but current discussions are on a $6bn, 18-month bridging loan, potentially taken out by a bond, a $3bn, three-year loan and a $5bn, five-year loan, both of which may stay in place.

Price talk for the shorter dated maturities is around 100 basis points over Libor, but pricing will depend on whether this is a bridge to bond structure or whether term financing is involved as well, one of the bankers said.

Details are expected to firm up by the end of November.

The borrower is said to be also still looking for a financial adviser, and any bank chosen for that role will not lend to the deal to avoid a conflict of interests.

Etisalat, which operates in 18 countries including Egypt and India, but derives 85 per cent of its income from domestic operations in the UAE, is among Gulf telcos looking to expand overseas after losing their monopoly at home.

The company, advised by Morgan Stanley and National Bank of Kuwait, offered in September to buy a 46 per cent stake in Zain for 1.7 dinars ($6.07) a share, in a deal worth just under $12bn.

Zain confirmed on Monday its board of directors had approved opening the company's books for due diligence by Etisalat.

The buyer said last Wednesday it was making any deal dependent on the sale of Zain's Saudi assets.

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