x Abu Dhabi, UAEFriday 19 January 2018

Etisalat to raise up to $8bn in bond sale

UAE's largest telecoms operator says $7bn global medium-term bond and $1bn sukuk will help fund deal to buy Kuwaiti telecoms operator Zain.

Etisalat, the UAE's largest telecommunications operator, plans to raise as much as US$8 billion (Dh29.37bn) by selling bonds.

The company made the disclosure ahead of its planned acquisition of the Kuwaiti operator Zain.

Etisalat has begun the due diligence process to acquire a 51 per cent stake in Zain in a deal worth about Dh44bn. The deal is expected to close in the first quarter of next year and would make Etisalat one of the largest telecoms operators in the world.

In a statement to the Abu Dhabi Securities Exchange, Etisalat said it had opened a programme for a $7bn global medium-term bond and a $1bn sukuk.

The establishment of the bond and sukuk programme will help Etisalat diversify its funding sources and manage its debt maturity profile effectively, the company said.

Salem Ali al Sharhan, Etisalat's group chief financial officer, said: "The purpose of this is to have a programme to allow us to issue bonds or sukuk in the future if we want to use it. We can go up to $8bn only if there is a need."

Mr al Sharhan did not rule out the possibility of Etisalat pursuing additional funding through bank loans.

"That option is always available to us," he said. "We have good relationships with all the banks. Our balance sheet is good so that makes us attractive to banks but we would like to control the options in case we need the funding."

Mr al Sharhan declined to comment on what kind of interest rates Etisalat was looking to set with its bonds but he said the market "is good for good companies like Etisalat".

Etisalat had about Dh10.6bn in cash and cash equivalents at the end of the third quarter this year, the company said in a recent financial statement.

The operator also has about Dh2.2bn in loans that are due for payment within the next 12 months.

Mr al Sharhan dismissed earlier reports that the operator was looking to raise $12bn in funding. He also declined to comment on what the funds would be used for.

In September, Etisalat formally announced its intention to buy Zain for Dh38bn for a 46 per cent controlling stake in the operator, upgrading its offer to 51 per cent last month.

Despite assurances from the Kharafi Group, a major Zain shareholder that has led acquisition talks with Etisalat, that it had solicited enough shareholders to make the deal happen, some investors in the Kuwaiti operator are disputing the offer.

Earlier this week, Al Fawares Holding, a Kuwaiti investor with a stake of less than 5 per cent in Zain, said it would sue the operator for opening its books to Etisalat for due diligence without asking for Al Fawares's approval.