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Airtel Africa’s Dutch subsidiary repays $550 million bond

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In Short:

Airtel Africa’s holding company repaid a $550 million bond to cut foreign currency debt. It used cash reserves at the holding company level. Airtel Africa’s profits dropped due to currency headwinds in Africa. Credit-rating agency S&P Global expects further decline in earnings. Analysts warn about impact of Nigerian naira devaluation on operating income in FY25. Airtel Africa’s arm highlights success in reducing debt and achieving zero-debt position at holding company level.

Airtel Africa Repays $550 Million Bond to Cut Foreign Currency Debt

Airtel Africa’s Netherlands-based international holding company has successfully repaid a $550 million bond that was due this month in an effort to reduce foreign currency debt. Bharti Airtel’s Africa unit confirmed the full repayment of the 5.35% Guaranteed Senior Notes maturing on May 20, 2024, through its subsidiary, Bharti Airtel International (Netherlands) B.V.

Debt Reduction Strategy

The bond repayment was funded entirely from cash reserves at the holding company level as part of Airtel Africa’s strategy to lower external foreign currency debt. Following the company’s IPO in June 2019, Airtel Africa had significant external debt at the holding company level, leading to exposure to currency fluctuations and dependence on fund transfers to cover interest costs and principal repayments.

Financial Challenges and Outlook

Airtel Africa has faced currency headwinds recently, with its consolidated net profit dropping by 31% in the March quarter of FY24 due to the devaluation of the Nigerian naira. The company’s net debt in the fiscal fourth quarter rose by 6.8% sequentially to $3.5 billion.

Credit-rating agency S&P Global anticipates a nearly 20% decline in Airtel Africa’s EBITDA for the current fiscal year, citing currency-induced weakness in the African operations. Analysts have also warned that the depreciation of the Nigerian naira could impact the company’s operating income in FY25.

Debt Reduction Success

Despite the challenges, Bharti Airtel’s Africa arm highlighted its progress in reducing Holdco debt over the years through strong free cash flow generation and upstreaming success. This effort has enabled the company to achieve a zero-debt position at the holding company level.

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