denotes premium content | Jan 6 2009 
Feature
posted 23 Feb 2005 in Volume 8 Issue 4
Telemar, Brazil: Finnvera breaks ground on Telemar financing
MLA & bookrunner: Citigroup & ABN Amro
Deal Size: $816m comprising: $466m international banking facility (tranches B1, B2, B3 and C) with two-year tenor; $200m ECA-supported facility (tranche D) with five-year tenor; $50m international banking facility (tranche E) with three-year tenor; $100m partially Finnvera supported facility (tranche F) with six-year tenor
Purpose: pre-pay existing debt and purchase licensed software, equipment and services
Closing: August 2004
The Telemar financing stands out as something of a landmark deal in Latin America. It is the first repricing of a syndicated-loan facility in Brazil in a deal that has an important trade-related component that involves vendors, export credit agencies (ECAs), and a bank-loan component.
The deal, which was oversubscribed and had 20 banks participating on it, successfully closed on time despite the challenging structure and the multiple parties and tranches involved.
Finnish ECA Finnvera’s 100% comprehensive guarantee for the $80m export-agency-financed tranche allowed Telemar to obtain a longer tenor at reduced costs. Finnish Export Credit (FEC) acted as the tranche F lender of record. The loans granted by FEC provided an attractive funding cost and tax advantages. Nordic Investment Bank lent the remaining $20m portion.
“Telemar is a first-class borrower,” says Topi Vesteri, executive vice president of Finnvera in Helsinki. “This and the banks’ commitment to finance Telemar in other transactions allowed us to make an exception and provide 100% comprehensive cover instead of our standard 85% cover.”
The deal enabled Telemar to renegotiate its whole liability package under better financial terms. And, according to the Citigroup global markets team involved in the transaction, its timing allowed the company to take advantage of the improved liquidity in the bank markets. Citigroup acted as MLA and bookrunner on the deal alongside ABN Amro.
The transaction refinanced Telemar’s 2001 $717m syndicated loan and is 100% guaranteed by Telemar’s parent company, Tele Norte Leste Participações. The funds will also be used to finance the network expansion of Telemar, with equipment purchased from Nokia, Siemens and Alcatel.
Telemar is the largest fixed-line operator in South America, with a customer base of more than 19 million.
