Safaricom has restructured $400 million worth of short-term credit facilities into medium-term loans in a process that saw part of the debt converted into local currency to ease pressure on cash flows and reduce foreign exchange risks.
The company had borrowed the cash last year from a consortium of lenders including Standard Chartered Bank Kenya to make its contribution to the payment for the $850 million fee for a telecoms licence in Ethiopia.
The Nairobi Securities Exchange-listed firm says in its latest annual report that the borrowings have since been restructured into two facilities, stretching out the repayment over seven years.
“During the year, the bridge facility was converted into a five-year long-term facility of $120 million and a Sh31.1 billion ($280 million) seven-year with two years moratorium on principal repayment,” the firm said.
“The new facility was done through a syndication process where both local and international banks participated in.”
The extension of the maturity period and conversion of part of the debt into local currency have saved the telco from a major repayment headache at a time when the weakening of the shilling has inflated dollar-denominated loans.
The Kenyan shilling has depreciated 8.7 percent over the past 12 months to trade at 118.3 units to the dollar, raising the cost of repaying interest and principal for borrowers in the hard currency.
Safaricom did not disclose the interest rate on the two new credit facilities and neither did it specify the lenders who provided the funds. Stanchart has separately said it was part of the consortium that lent the funds to the telco.
The telco said it closed the year ended March with net debt of Sh34.5 billion. The company borrows tens of billions of shillings but usually pays most of the debt within months.
The expansion into Ethiopia has seen it borrow more funds long-term as it invests in the new subsidiary that is expected to break even within four years.
The Ethiopia business reported a net loss of Sh4.8 billion in the 10 months ended March, reflecting the startup costs in a period when it had no revenue.
Safaricom’s partners in the joint venture –Safaricom Ethiopia— are Sumitomo Corporation, CDC Group and Vodacom Group. The Nairobi-based telco is the majority shareholder in the new subsidiary with a 55.71 percent stake.