Vimpelcom setting up group bank to reduce borrowing costs
MOSCOW. Jan 17 (Interfax) - Vimpelcom Ltd., the world's sixth largest mobile phone company by subscriber base and owner of Russia's Vimpelcom , is setting up an in-house bank that will take over most of the responsibilities of operating companies concerning raising external financing.
The bank will handle external borrowing and redistribute financial flows among group subsidiaries, Vimpelcom CFO Hank van Dalen said Wednesday at a conference for investors and analysts in London.
He estimated the amount of money that will be redistributed by the bank at $13 billion-$15 billion.
Vimpelcom expects that the in-house bank will enable the company to boost cash flow by $200 million-$250 million per year.
The bank will be set up in Luxembourg, the tax laws of which will enable it to save about $16 million on every billion in capital, Vimpelcom said in a presentation. The bank will form its capital with the funds of parent company Vimpelcom Ltd. and will raise external financing. These funds will then be lent out to operating companies. The bank will operate at a loss, so its interest income will not be subject to tax.
The new financial institution will help optimize Vimpelcom's capital structure, organize funding of capex and acquisitions within the group, manage excess cash flow and currency risks, Vimpelcom believes.
Vimpelcom's gross debt stood at $26.6 billion at the end of the third quarter of 2012, and its net debt was $22.68 billion. The net debt/EBITDA ratio was 2.4%. Vimpelcom aims to reduce this figure to less than 2 by the end of 2015.
