TDC surges ahead: first Danish telecom deal backed by EKN

Export finance backed by ECAs is gaining traction in high-income countries as more companies recognise it is an attractive way to diversify their funding base and reduce financing costs. One recent example is TDC NET — Denmark’s largest provider of digital infrastructure — securing a EUR 125 million EKN-guaranteed facility to finance the purchase of 5G equipment from Ericsson.

Acting as sole mandated lead arranger, lender, EKN agent, and facility agent, ING proposed export finance as a novel instrument for TDC NET to secure long-term financing and further diversify their funding base. “The deal marked the first time an experienced market leading company went for an ECA-financed product,” says Eugène Kock, Director Structured Export Finance at ING.

There were, however, significant hurdles to overcome before everyone involved could sign off. “This has been one of the most complex export finance deals I have worked with over the past 20 years,” admits Kock.

The complexity stems largely from the fact that TDC NET has created a secured infrastructure financing platform based on whole-business securitization (WBS), a structured finance model where a company issues secured debt against substantially all of its cash-yielding assets. “This is a bespoke financing structure that comes with a set of common terms that all present and future lenders and bondholders have to accept. Ring-fenced securitisation resulted in investment-grade debt rating for the borrower’s debt,” says Kock and adds, “All debt is placed in a single bucket, benefitting from the same covenants and security described in common documents that existing and future lenders and bondholders have to accede and adhere to. The goal is to attract lenders and bondholders and obtain better terms as a result of improved debt rating.”

Challenging task

Ring-fencing is a legal structure that prevents the borrower’s secured assets from being transferred outside of the ring-fenced Group.

Fitting the EKN-guaranteed facility to TDC NET's secured infrastructure financing platform, however, proved to be a challenging task. “The main challenge was to marry the common terms of the ring-fenced bespoke financing platform with standard ECA requirements that are usually non-negotiable. It was a tough exercise, and we really appreciate EKN’s flexibility to make this work,” says Kock.

At TDC NET, Head of Treasury Frederik Wagner is equally pleased. “Our secured infrastructure financing platform is a landmark transaction in the Danish market, being the first WBS for a Danish company. The successful implementation of an ECA-covered financing into the WBS structure is a fantastic achievement and required a lot of hard work from the dedicated teams at TDC NET, ING, and EKN and our financing counsel, Anne Cathrine Ingerslev at Bruun & Hjejle, who has been instrumental to the creation of our financing platform and making the ECA-covered financing work for us.”

At ING, Kock concludes, “What EKN has done is fantastic. As far as I know this is the first-ever ECA facility on a WBS ring-fenced structure.”