OREANDA-NEWS. MegaFon PJSC (“MegaFon”, or the Company) (LSE: MFON), a leading Russian telecommunications operator, announces implementation of initiatives aimed at further optimization of the Company’s debt portfolio

New loan agreements with China Development Bank Corporation (“CDB”)

MegaFon and CDB have signed two credit facility agreements for a total amount of USD 600 mln., namely:

  • USD 300 mln. facility for refinancing of the Company’s existing debt with a 6 years tenor
  • USD 300 mln. facility for financing of equipment purchases from Huawei Tech Investment Co. Ltd with an 8 years tenor 

The Company considers signing the refinancing facility to be a major step in developing its relations with CDB as this is the first facility with a purpose extending beyond the equipment purchases, thus significantly broadening MegaFon’s access to sources of debt refinancing.

Optimization of ruble debt portfolio and new Sberbank credit facility

MegaFon and Sberbank have signed addendum agreements to two outstanding credit facilities made in 2012 which will eliminate the bank’s right to implement a unilateral increase in the interest rate payable in exchange for an upward revision of the interest rates under these facilities to the following new levels:

  • 9,85% p.a. — under the credit facility maturing in December 2018;
  • 10,10% p.a. — under the credit facility maturing in December 2020.

As the interest rates under these facilities remain highly attractive in the context of recent benchmarks, the Company believes that this step is very important in the light of the CBR’s announced intention to raise its refinancing rate to the level of the key rate by early 2016, which could cause the interest rates under these facilities to increase significantly.

Additionally, MegaFon and Sberbank have signed a new revolving credit facility agreement for the total amount of up to RUB 30 bln. with a 5 years tenor. Proceeds from this credit facility may be used for general corporate purposes.

Under this new credit facility with Sberbank, MegaFon has drawn a tranche in the amount of RUB 15 bln. for a 3 year term at a fixed interest rate. Proceeds of the loan will be used to refinance the Company’s more expensive Ruble debt that falls due in 2016.

New financing allows the Company to substantially reduce overall debt service cost and further extend maturities.

Gevork Vermishyan, Chief Financial Officer of the Company, said: “We are pleased to announce these recent steps taken in our programme of debt portfolio optimization and we appreciate the support of our long-term partners, CDB and Sberbank. These agreements will allow us to pre-emptively extend the average life of our debt portfolio and significantly reduce 2016 refinancing risk as well as the risk of interest rates hike. And with the first-ever refinancing facility from CDB we receive even more flexibility in terms of our debt management and diversification”.