VSNL's South African arm, Neotel receives Rs1,300-crore debt facility

13 December 2006

South Africa's second fixed line operator, Neotel, a subsidiary of VSNL has signed a Rs1,300-crore bridge debt facility with a funding consortium of South African financial institutions.

The facility has been fully underwritten by the funding consortium comprising Nedbank Capital, the investment banking business of the Nedbank Group, Investec Bank Ltd and the Development Bank of Southern Africa.

The consortium will jointly finance Rs900 crore of the debt, while the Industrial Development Corporation of South Africa will finance a further Rs400 crore.

The debt will be provided on a project finance basis with a term of 18 months. This is the largest non-recourse facility for a start-up telecommunications project in the region, and one of the largest in South Africa to date. Attractive terms for the debt have been offered by the financial institutions to ensure that Neotel is allowed adequate time to establish itself in the market.

Neotel will re-finance the debt with a long-term facility after 12 months. Nedbank Capital, Investec and the Development Bank of South Africa have been appointed as the mandated lead arrangers for the long-term facility, which will be in excess of Rs2,600 crore. The debt is complemented by in excess of Rs1,300 crore of equity that will be contributed by the Neotel shareholders.

The funds will be utilised by Neotel for building its network, which at present consists of 1,300km of optic fibre cable in the six main metropolitan areas. This infrastructure was purchased from Transnet for Rs165 crore earlier this year.