Neotel has announced a new project finance deal with a value of R4,4-billion.
The telecommunications operator signed the financing agreements yesterday, largely concluding a two-year long programme to raise long term financing and has secured R7,5-billion of total funding, replacing all existing bridging finance, and which is made up of a combination of new equity and debt.
The debt facilities have been arranged by three of the leading financial institutions in South Africa, namely Nedbank Capital, the investment banking division of Nedbank, Investec Bank and the Development Bank of Southern Africa.
The funding will be provided by a consortium of institutions including Nedbank, Investec Bank, the Development Bank of Southern Africa, the Industrial Development Corporation and the Infrastructure Finance Corporation.
"On 12 December 2006, we signed a bridging finance facility to the value of R2-billion to get the process started of building our network," says Ajay Pandey, MD and CEO of Neotel. "At that point already we made history as it was the largest non-recourse facility for a start-up telecommunications project in the region, and one of the largest in South Africa then."
Neotel has been aggressively rolling out the new-generation converged network across the country to provide services to its enterprise clients.
"In addition we launched our consumer services during the course of 2008 and finally the South African consumer not only has a choice, but they are seeing real value," says Pandey. "We continue to grow our network aggressively to ensure that customers have access to the value adds that we bring to the telecommunications market."
Neotel has now signed its second non-recourse facility which replaces the bridging facility, this time more than double the size of the previous deal.
"What makes this deal significant," says Arun Gupta, chief financial officer of Neotel, "is the fact that a limited recourse deal of this size has been concluded and this despite the current global economic climate."
The Neotel transaction will be funded through a combination of senior, subordinate and mezzanine debt financing.
"We are still regarded as a greenfield project as there have been a number of false starts in the past," says Gupta. "The fact that the financial institutions have provided this facility on project finance, limited-recourse terms highlights the belief the lenders have in what Neotel is bringing to the market and that we're on the right track."
The financing will be provided from the finance consortium with terms ranging between seven to 10 years.