DUBAI: Abu Dhabi gave Etisalat a $500m grant towards its €4.14bn purchase of 53 percent of Maroc Telecom, the company’s prospectus for a planned bond issue shows.
The grant provides further evidence of Abu Dhabi’s support for its companies’ foreign expansion but could draw complaints from rivals about the Gulf emirate using its vast hydrocarbon wealth to subsidise state-owned businesses and distort competition.
Fellow Abu Dhabi-based company Etihad Airways benefited from a $3bn interest-free loan from the emirate’s ruling family, the Australian Financial Review newspaper said last week, leading to complaints from rival airlines.
The Etisalat grant was mentioned in the prospectus for a bond issue to help to repay some of the debt the company took on to complete the Maroc Telecom transaction. “In connection with the acquisition, the group received an amount of $500m as a grant from an entity owned by the government of Abu Dhabi,” the document stated.
Etisalat is 60 percent-owned by the United Arab Emirates. Etisalat did not respond immediately to a request for comment.
The grant comes on top of an 8.7 percent stake taken by the Abu Dhabi Fund for Development — a state body which provides cheap loans and grants for projects in developing nations — in the legal entity that will hold Etisalat’s Maroc Telecom stake.
Sources had said in April that Abu Dhabi was providing a quarter of the funding for the purchase of the stake from France’s Vivendi, with the rest coming from bank loans.
Etisalat said last month that it had raised a €3.15bn loan facility from 17 local and international banks, split between a €2.1bn one-year bridging loan and a €1.05bn three-year loan.
The bridging loan was always expected to be refinanced with a bond issue and Etisalat could start marketing that as early as next week, having chosen four banks to arrange the issue, four banking sources said.
It has chosen Deutsche Bank, Goldman Sachs , HSBC and Royal Bank of Scotland to arrange the euro-denominated offering, the sources said. These four banks could be joined by others from among the company’s lenders as “passive bookrunners”, three of the sources said, although they added that Etisalat had yet to decide how many banks would be given such a title.
Under such a scenario, the main bookrunners take charge of running the bond sale to investors. The passive bookrunners play little or no role, but both will be paid an arranging fee by the issuer, with the main banks usually receiving a greater sum.
The bond issue, should it materialise, will be Etisalat’s debut offering and is expected to attract significant investor demand, given its rarity value and high rating.
In a rating report last week, which classified both the company and the bond programme as Aa3, Moody’s said that Etisalat’s rating was “amongst the highest for any rated global telecommunication service provider”.
Investors are likely to compare the bond with other Abu Dhabi state-linked entities, such as Mubadala. Also rated Aa3 by Moody’s, it issued a $750m bond with a seven-year lifespan on April 23 at a spread of 120 basis points over equivalent US Treasuries.
Meanwhile, Etisalat has also scrapped an offer to buy the remaining shares in the Moroccan firm, the UAE operator said.
In a filing to Abu Dhabi’s bourse, Etisalat said it had been exempted from making an offer to minority shareholders, which is usually required under Morocco’s takeover rules.
An Etisalat spokesman separately confirmed this meant the company had now abandoned a provisional offer submitted earlier to the Moroccan authorities for approval. Reuters
