Citigroup replaces PIC in Telkom loan

By Nicola Mawson for Telkom

Johannesburg, 18 Jul 2006

New York Stock Exchange-listed Citigroup has bought out the Public Investment Corporation`s (PIC`s) loan to the Elephant Consortium, which was originally used as part financing of its stake in Telkom.

In a statement issued yesterday, the companies said PIC had secured the investment (covering the loan) from Citigroup for its participation in the "C Tranche" funding of the original black economic empowerment (BEE) transaction, which was completed in May last year.

PIC, a state investment organisation, said it still had a "significant" shareholding in Telkom, which is 37.7%-owned by the South African government.

An analyst explains the original loan PIC advanced to the Elephant Consortium, headed by Andile Ngcaba, has simply been taken over by Citigroup. As a result, no shares will have changed hands and Citigroup may only have access to shares if the Elephant Consortium defaults on its loan payment.

In November 2004, PIC had a 15.1% stake in Telkom, which it acquired from Thintana Communications and was warehousing this stake on behalf of the Elephant Consortium.

In May last year, it was agreed PIC would sell 10.1% to the Elephant Consortium at R92.50 a share, but the consortium was to allocate 3.37% of this stake for further broad-based BEE. PIC, Absa and Nedbank agreed to finance the balance, which was 6.7%, to a total of R3.6 billion.

By 9.30am today, Telkom shares had moved up 1.13% and were trading at R121.86.

The agreement came into effect on 28 June.