THE State Bank of India will extend $3 billion loan to Bharti Airtel for part-financing the acquisition of the South African assets of Zain Telecom.

About $1 billion would be in dollar denomination while an equivalent of $2 billion dollars would be rupee loans. ICICI Bank, IDFC and a clutch of other Indian banks would participate in the rupee funding.

The company is expected to call a board meeting soon to seek shareholders' approval for the acquisition around March 15.

Bharti Airtel is expected to avail of a six-year, $10 billion debt for the acquisition of Zain’s Africa operations. It will use cash generated from the operations to repay the debt, according to officials close to the negotiations. Bharti Airtel is expected to generate excess cash of over $2 billion each year, which would be utilised to repay the debt. The acquisition financing will cost Bharti Airtel 225-300 basis points over London inter-bank offered rate (Libor).

Bharti Airtel is planning to opt for a $10.7 billion all-cash deal with Zain, which will force it to take a debt of $10 billion to pay for the acquisition. To finance the deal, a special purpose vehicle (SPV) will be formed with the loans being extended to this entity. Bharti will stand guarantee to the loans. There would be no equity dilution for funding of the deal.

When contacted, Bharti declined to comment. All a Bharti spokesperson said in response to a detailed questionnaire was: “We have no further comment to offer beyond our statement.”

Barclays has offered an underwriting commitment of $5 billion while Standard Chartered has pitched in with $10 billion, according to sources. Standard Chartered Bank may take about $1 billion on its books. The banks that are expected to make offers on the remaining $6 billion foreign debt would be Barclays Finance, Citi Bank, Deutche Bank, BNP Paribas, DBS Bank, UBS, Credit Agricole, HSBC, Bank of America Merrill Lynch, Bank of Tokyo Mitsubishi, SG Asia, RBS, JP Morgan and State Bank of India.

Most of the foreign banks except for Bank of Tokyo Mitsubishi and Standard Chartered, will not keep the long-term debt on their books for long and would syndicate it.

Some foreign lenders are of the opinion that the pricing should be at least 300 basis points over Libor as the loan amount is large and of longer duration. But sources say that the company would be able to negotiate hard with the banks and get a pricing much below this rate, considering that a large number of lenders are excited to participate in funding the deal.