Blue Label Telecoms, the largest shareholder in Cell C, said it Thursday that the recapitalisation of the mobile operator has finally been completed after years of negotiation.
The news comes after Blue Label concluded “binding long-form agreements) with Cell C and various Cell C financial stakeholders, including certain shareholders and creditors of Cell C”.
All conditions precedent have now been met, Blue Label said in a statement to shareholders.
“The recapitalisation was the final and critical pillar of Cell C’s turnaround strategy; deleveraging the balance sheet, providing liquidity to operate, and putting the company on a trajectory of growth and long-term sustainability,” said Cell C CEO Douglas Craigie Stevenson in a separate statement.
However, Cell C’s debt holders took a huge haircut as part of the recap – securing only 20c in the rand of the money they provided.
It comes after Cell C decided to shift away from building its own radio access networks for a more “capex-light” approach, where it relies instead on the infrastructure of partners MTN and Vodacom.
“We are immensely pleased and humbled to have received the support of our many stakeholders, in particular our shareholders, our infrastructure partners who showed belief in our new model, bought into the new business strategy and supported the vision of the turnround and our customers for their patience,” Craigie Stevenson said.
‘Fit for purpose’
“Day one post recap, Cell C will have achieved a significant reduction in the debt of the business to enable us to move forward and make the business more streamlined as a new, reinvigorated and fit-for-purpose entity to compete in the dynamic and changing telecommunications landscape. We are well placed to play in a market that is now made up of infrastructure buyers and sellers,” he added.
He said that the short- and medium-term operational focus for Cell C will be to finish the implementation of the network migration by end-2023 to get to 14 000 outsourced high sites. It will “bring to market innovative product offerings specifically on prepaid, a new way of doing business and the ability to make significant moves in the wholesale business”.
This is the summary of Cell C’s debt restructuring, how it works and what comes next:
- It entails the restructuring of Cell C’s debt owed to certain secured lenders totalling R7.3-billion (fixed as at November 2019).
- Blue Label will provide liquidity via a secured loan of R1.46-billion.
- 03-billion of this debt funding will be used to pay out the secured lenders as per the accepted compromise offer of 20c for every R1 of debt.
- Secured lenders who have elected to remain invested in Cell C will loan an amount equal to the 20c received from the compromise offer under a new loan arrangement referred to as the “reinvestment instrument”.
- This new loan arrangement will be interest-bearing, secured and give an aggregate capital face value equal to 2.75 times (or 55c) of the amount advanced.
- All participating lenders in the new loan will be entitled to share pro rata in a fresh issue of ordinary shares in Cell C at a nominal value. All current shareholders will dilute proportionately to allow for this new issue of ordinary shares.
- The Prepaid Company (TPC), a Blue Label subsidiary, will hold 49.53% of shares in Cell C after completion of the restructuring;
- Additionally, an amount of R1.1-billion owed by Cell C to Comm Equipment Company (a wholly owned subsidiary of TPC) will be deferred and repaid in equal monthly instalments over 60 months.
- For Cell C’s working capital requirements, TPC will purchase Cell C prepaid airtime to the value of R1.2-billion (including VAT).
- TPC will also purchase four quarterly payments of airtime to the value of R300-million (including VAT). The first payment will be at the beginning of the 13th month following the recapitalisation of Cell C.
- In conjunction with other third parties, TPC will purchase certain levels of stock from Cell C based on an agreed monthly schedule or in line with market requirements.
- TPC will raise R1.6-billion of the required funds from financial institutions, the settlement of which is to be repaid over a 24-month period in equal monthly instalments.