denotes premium content | Sep 7 2010 
Feature
posted 23 Feb 2005 in Volume 8 Issue 4
Colombia Móvil: Pushing the boundaries of local currency financing
Sole arranger & lender: Citigroup
Borrower: Colombia Móvil
Deal size: $120m comprising: a $78.22m 7.5-year term loan facility provided by Citigroup and 95% comprehensively guaranteed by Hermes, the German export credit agency; a $15m 7.5-year term loan facility provided by Citigroup and 100% comprehensively guaranteed by US Ex-Im Bank, the US export credit agency; and a $26.78m 8-year term loan facility that will be a follow-on facility provided by Citigroup and 95% comprehensively guaranteed by Hermes. This is expected to close in early 2005
Signing: December 2004
Despite difficult market conditions, Citigroup was able to arrange almost $120m in term-financing for Colombia Móvil (CM), the country’s first 100% Colombian-owned mobile telecom operator. In this deal, Citi, which is at the forefront of local currency financing, arranged the first ever Colombian peso-indexed loan.
Since all of CM’s revenues are in local currency (the Colombian peso), CM’s financing plan required all debt to either be in local currency or hedged. Despite the fact that Hermes does not provide local-currency guarantees and US Ex-Im was unable to do so due to legal issues, Citigroup was able to structure the transaction so that CM receives a synthetic local currency loan by embedding indexed funding into it.
“The innovation of synthetic-local-currency financing provided a novel way to satisfy the clients local-currency needs where local-currency financing was unobtainable from the agencies,” says Valentino Gallo, managing director, export and agency finance, at Citigroup. “Synthetic local financing is a stepping stone to achieve full local financing that will be international in scope.”
Citigroup successfully managed the approval processes of both export credit agencies (ECAs) and worked closely with CM to structure the transaction in accordance with the policies of Credito Público and the ministry of finance in Colombia.
By accessing ECA investors, CM achieved extended tenors and lowered pricing from what is normally available in the Colombian market. In addition, through the currency indexation, the company was able to meet its need for local currency exposure.
Adds Gallo: “Use of local financing will become more important in the years to come and agencies will have to adjust their product policies accordingly.”
CM will use the funds to pay down contracts with Siemens and Hewlett-Packard for the import of GSM equipment and services and a technological platform that helped the company begin operations.
Colombia Móvil started its GSM operations in November 2003. It was formed as a joint venture between EPM (Empresas Públicas de Medellín) and ETB (Empresa de Teléfonos de Bogotá).
