On September 1, Bharti Infratel’s board had approved going ahead with the merger of the company with Indus Towers, a deal which will create one of the world’s biggest telecom tower companies with 1,69,000 towers.
But “The agreement to proceed (with the transaction) was conditional on consent for a security package for the benefit of the Combined Company (Infratel-Indus merged entity) from Vodafone’s existing lenders (for the €1.3 billion loan utilised to fund Vodafone’s contribution to the Vodafone Idea Ltd rights issue in 2019),” the British telecom major said in a statement on Monday.
Back in 2019, Vodafone Group had pledged its entire over 44 per cent stake in Vodafone Idea with seven foreign banks for financing arrangements after the telco issued new shares to promoters in a Rs 25,000-crore rights issue. Vodafone Group had subscribed to shares worth around Rs 11,000 crore in the issue. Shares were pledged in favour of HSBC Corporate Trustee Com (UK), which is acting as a trustee for BNP Paribas, HSBC Bank Plc, ING Bank NV, Stan-Chart Bank, BankAm-Merrill Lynch and Morgan Stanley Senior Funding Inc.
“This consent (from Vodafone lenders) has now been received. The parties will now approach the National Company Law Tribunal to make the merger scheme effective. The parties are working to complete the transaction expeditiously,” the company added.
The Vodafone Idea stock closed down 2.4 per cent at Rs 9.02 on the BSE Monday.
In its statement of September 1, Bharti Infratel had said that to secure the payment obligation of Vi under the master service agreements (MSAs), “VIL and UK’s Vodafone Group Plc have entered into certain security arrangements with the company for the benefit of the merged company”.
This, it said, “includes a combination of a security deposit by VIL, security via pledge of a certain number of shares of the merged company out of those issued to Vodafone Plc (as part of the Scheme) and a corporate guarantee by Vodafone Plc, which can get triggered in certain situations and events”.
These security arrangements, Bharti Infratel added, remain “subject to all applicable regulatory approvals and any approval of Vodafone Plc’s lenders”. The security arrangement will provide the merged tower company a payment cover of over one year for the operational payments due from VIL.
Vodafone Idea, which holds 11.15 per cent stake in Indus Towers, plans to cash out at the time of merger against a cash consideration of around Rs 4,040 crore. The telco desperately needs cash to invest top dollars to expand its 4G network to catch up with Bharti Airtel and Reliance Jio and pay its adjusted gross revenue (AGR) dues.