This is why Airtel Africa redeemed its $505 million bonds early and chose to sell off tower assets instead

This is why Airtel Africa redeemed its $505 million bonds early and chose to sell off tower assets instead
  • By redeeming the $505 million bonds early, Airtel Africa Plc saved as much as $26 million on interest payments.
  • Companies recall bonds early when they want to clear debts from their books and avoid the regular interest payments.

Airtel Africa surprised stakeholders some months ago when it announced an early repayment of its $505 million senior secured loan, using cash balances available at group level. The debt was not due for maturity until March 2023.

Prior to the unexpected announcement, the telecom giant had sold its Madagascan tower company to Helios Towers Plc for $51.7 million. It also sold its Tanzanian tower assets for $176.1 million to a joint venture led by SBA Communications Corporation and Paradigm Infrastructure Limited. And then shortly after announcing the early bond redemption, Airtel also sold its Malawian tower assets for $54.7 million.

Interestingly, these strategic decisions were all intended to help save the company about $26 million.

The $505 million senior secured loan had been issued to help Airtel raise capital to offset some of its group debts. However, by choosing to redeem the bonds earlier and sell off its passive tower assets across Africa instead, the telco saved as much as $26 million which would have been paid to investors as interests, had the company waited till the bonds' original March 2023 maturity date.

In the company's recently released earnings report for the financial year ended March 2022, further explanations were offered:

“In line with our strategy to continue to reduce foreign currency debt at holding company, we also repaid $505 million bonds in March 2022, a year earlier than their March 2023 redemption date. Our balance sheet has also been further de-risked by continued localisation of our debt into the operating companies (OpCos) and material debt reduction in Holding Company (HoldCo).”

Business Insider Africa understands that the telco has so far successfully reduced its group dollar debt by $1.7 billion and improved its leverage ratio. It now has only about $1 billion worth of debt remaining to be repaid.

Recall that the company reported an impressive 20.6% revenue growth to $4.7 billion for the financial year ended March 2022. Profit for the period also grew by 82% to $755 million.

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