What you need to know:
Meaning. A syndicated loan is one that involves a group of lenders (called the syndicate) who pool their lending resources to make a loan
With no long-term debt on its books, MTN Uganda has borrowed $114m (Shs385.8 billion) from four local banks in Uganda. This is the third largest corporate finance facility arranged by local banks in Uganda’s history.
The money, according to MTN, is meant for further expansion of data network, construction of their head office on Jinja Road and upgrade of their IT systems.
Two of Uganda’s largest banks, Stanbic Bank and Standard Chartered Bank, provided the syndicated loan, together with Barclays Bank and Citi Bank. A syndicated loan is one that involves a group of lenders (called the syndicate) who pool their lending resources to make a loan.
“We intend to invest Shs238 billion in 2016 and Shs299 billion in 2017 in Uganda for further expansion. We cannot do that without funding from various sources,” Mr Brian Gouldie, the CEO MTN Uganda told Daily Monitor on the sidelines of the signing ceremony yesterday.
Mr Gouldie further pointed out that investment would improve the quality of service to MTN Uganda customers.
This is the second time MTN Uganda, which is Uganda’s largest telecommunication corporation with annual revenues in excess of Shs1.2 trillion, is securing a syndicated loan from banks. In 2009, a mix of local and international banks lent MTN Uganda $100m (Shs338.4 billion) meant for expansion.
According to Mr David Blackburn, the chief financial officer MTN Uganda, the company has long paid off that loan in full.
Mr Glen Ssekabira, the deputy executive director Supervision, Bank of Uganda (BoU) told reporters that syndicated loans help the banks share the risks associated with lending large corporations.
“MTN Uganda could have gone elsewhere outside the country to get the money. Instead, they used local banks and in the unlikely event that MTN Uganda defaults, the banks can share the risk,” he says.
He also noted that this was an indicator that Uganda’s banking sector had the capacity to finance – to some extent – several projects if they worked together more closely.
Ugandan banks are estimated to have the capacity of financing a single project to a tune of no more than $200m (Shs676.9 billion).
Largest syndicated loans in value in Uganda’s history include: Umeme Limited $190m (Shs643b) – 2013; Kakira Sugar $115m (Shs389b) - 2012; MTN $114m (Shs386b) – 2016; MTN $100m (Shs338.4b) – 2009; Steel Rolling Mills $64m (Shs216.6b) – 2010