IHS secures $439M Loan for Debt Refinancing and Expansion Plans
IHS Towers is the largest telecommunication tower company in Africa. In the world, IHS Towers is one of the largest independent owners, operators, and developers of shared telecommunications infrastructure.
The tower company has just secured a sum of $439 million for managing fiat risks and enhancing it operations in multiple countries across Africa. As per TechCabal report, nearly half of the loan is denominated in South African Rand, with the remaining portion, amounting to $255 million, in U.S. dollars.
Founded in 2001, IHS Towers provides mobile network operators with infrastructure such as towers and other equipment necessary for wireless communications. IHS Towers operates in multiple countries, primarily across Africa, Latin America, and the Middle East.
About the IHS Towers’s Loan
This latest funds (loan) secured by the company will be used to clear off outstanding debts which was obtained in October 2022 and set to mature in 2025.
The company refinancing its debt early is part of strategy to get more and another favorable loan conditions, such as lower interest rates, which could reduce the overall cost of borrowing. More so, refinancing might allow the company to extend the time it has to repay the debt, improving its financial flexibility.
The transaction is labeled as “leverage neutral,” meaning that it will not significantly alter the company’s debt-to-equity ratio, or the balance between how much debt and equity it uses to finance its operations.
In essence, the company will replace old debt with new debt without increasing its overall financial risk. However, both the lender and the company come with a 4.50% interest rate.
The U.S. dollar portion of the loan is linked to the three-month SOFR, while the South African Rand portion is tied to the three-month JIBAR, both of which are variable interest rates that change with market conditions.
This means the cost of borrowing for IHS Towers could increase or decrease over time, depending on how these rates fluctuate. The loan is structured as a bullet-term loan, which allows IHS Towers to access the full amount immediately but requires the entire loan to be repaid in a single lump sum after five years, rather than through regular installments.
IHS Towers core business focuses on leasing space on its towers to mobile operators, which helps these operators expand their coverage without needing to invest in building their own towers.
This shared infrastructure model helps reduce costs and promote efficiency within the telecommunications industry, especially in Africa. IHS Towers has grown significantly through acquisitions and expansions, positioning itself as a major player in Africans emerging markets.
In mid-2024, IHS Towers laid off 100 employees as the devaluation of the Nigerian currency, its primary market, put pressure on its profit margins. The company had already experienced significant financial strain, with its losses surging to $1.9 billion in 2023, up from $469 million in 2022.
To mitigate its exposure to the U.S. dollar and stabilize earnings, IHS renegotiated tower contracts with key clients like MTN Nigeria. These new agreements allow IHS to collect payments in both U.S. dollars and local currency, and they also include provisions to cover rising diesel costs, helping the company manage its operating expenses more effectively.
