Telecoms showcase - local currency financing

Benchmark transactions - local currency financing

The EBRD is able, in the more advanced countries, to provide local currency financing, which is more suited to the needs of its Clients helping them to mitigate foreign currency risk.

Benchmark transactions include Vivendi Telecom in Hungary and Polska Telefonia Cyfrowa in Poland.

Polska Telefonia Cyfrowa, Poland

Polska Telefonia Cyfrowa (PTC), a leading Polish GSM provider, has received a €650 million syndicated loan facility arranged and underwritten by the EBRD, Deutsche Bank, Dresdner Bank Luxembourg and Deutsche Bank Polska. This is the largest single loan facility ever raised for a Polish borrower on a stand-alone basis.

The financing package comprises of a five year revolver, divided into Zloty and Euro tranche. The EBRD was a major underwriter of the Zloty tranche, guaranteeing €150 million. The total Zloty tranche, originally sized at €165 million, was increased to €257.5 million, reflecting the strong interest from domestic Polish banks and the local branches of international banks. The EBRD invested €75 million. The Euro tranche was fully underwritten by Deutsche Bank and Dresdner Bank Luxembourg S.A.

The proceeds will be used to support the growth of PTC's GSM network, the development of UMTS, as well as refinancing an existing credit facility.

The facility is designed to maximise the Zloty tranche and enable PTC to reduce its foreign-exchange exposure. This represents one of the largest local currency financings in the loan market for a central European borrower and the first local currency financing by EBRD in the telecoms sector. The project demonstrates EBRD's capacity to provide local-currency, long-term financing and work alongside commercial banks.

Vivendi Telecom, Hungary

The EBRD underwrote a €100 million participation in a €350 million syndicated revolving credit (including the HUF component) converting to an amortising senior-term loan. The transaction took place in two tranches: tranche 1 of €300m with 7.5 year maturity; and, tranche 2 of €50m with 8.5 year maturity that will be repaid in two equal annual repayments.

The EBRD's final participation will be €25 million of tranche 1 and €50 million of tranche 2. Tranche 2 will provide the company with long term finance currently unavailable in the syndication market. The purpose of the loan is to prepay existing network expansion loans and to finance further network expansion, acquisitions and investment.

This transaction plays a critical role in the impending consolidation of the Hungarian telecommunication industry. The consolidation requires refinancing of various existing facilities in the Vivendi Telecom Hungary Group and provides additional funding for potential acquisitions in the future. A further transition impact of consolidation is that it will build strong alternative telecom operators that will compete with Matáv from the end of 2001.