IHS Towers, the largest provider of telecommunications towers in Africa, has successfully obtained a substantial loan amounting to $439 million. This financial infusion is aimed at mitigating currency-related risks and bolstering the company’s operations that span various regions. A significant portion of this loan, nearly half, is denominated in South African Rand, while the remaining balance, which is $255 million, is in United States Dollars (USD).
The primary purpose of this newly acquired loan is for IHS Towers to settle an existing debt of $430 million that originated in October 2022 and was scheduled for maturity in the year 2025. By opting to refinance this debt well in advance of its due date, IHS Towers is positioned to potentially reap the benefits of more favorable lending terms. These benefits could include reduced interest expenses and the provision of an extended timeframe for the repayment of its debt. The financial strategy employed in this transaction is characterized as “leverage neutral.” This indicates that the transaction is structured in such a way that it will not cause a significant alteration to the company’s debt-to-equity ratio.
The loan is structured with an interest rate of 4.50% for both the USD and South African Rand components. The interest rate for the USD segment of the loan is linked to the three-month SOFR (Secured Overnight Financing Rate), while the interest rate for the South African Rand segment is associated with the three-month JIBAR (Johannesburg Interbank Average Rate). As these benchmark rates are subject to market fluctuations, they have the potential to influence the total borrowing costs incurred by IHS Towers.
The loan is arranged as a bullet-term loan, which stipulates that IHS Towers is obligated to repay the entire loan amount at the conclusion of the loan term, rather than adhering to a schedule of periodic payments throughout the term. This arrangement provides IHS Towers with immediate access to the loan funds, but also necessitates that the company must be prepared to make a one-time, lump-sum payment at the end of a five-year period.
An IHS Towers spokesperson, clarified that this financing is at the group level and, as such, does not exert a direct influence on any specific market within their operational footprint. In the middle of 2024, IHS Towers faced the necessity to reduce its workforce by 100 employees, a decision influenced by the devaluation of the Nigerian currency, which is a major market for the company. This economic pressure resulted in a significant increase in the company’s losses, which escalated to $1.9 billion in 2023, a stark rise from the $469 million recorded in 2022.
In an effort to diminish its vulnerability to fluctuations in the USD, IHS Towers has been actively pursuing strategies to reduce its exposure to the currency. This includes renegotiating contracts for tower services with key clients, such as MTN Nigeria, to include payment terms in both USD and the local currency. Additionally, the company has incorporated a pricing component to account for diesel costs, which is a critical operational expense.