Blue Label Telecoms says it has completed the recapitalization of Cell C through a binding long-term agreement with the mobile operator and various financial stakeholders.
In mid-2019, Cell C embarked on a turnaround strategy focused on operational efficiency, reducing operational expenditure and optimizing traffic.
This included a shift from a capital-intensive build-and-own network model to an infrastructure sharing model that offers variable operational spend and is scalable, Blue Label noted.
“Together with the recapitalization of the current debt structure, this will result in a significant improvement in liquidity and ensure the long-term sustainability of Cell C,” it said in a statement on Thursday (September 22).
Douglas Craigie Stevenson, CEO of Cell C, said: “The recapitalization was the final and critical pillar of Cell C’s turnaround strategy; deleveraging, providing liquidity to operate and putting the company on a path of long-term growth and sustainability.”
“We are extremely happy and humbled to have received the support of our many stakeholders, especially our shareholders, our infrastructure partners who believed in our new model, stepped into the new business strategy and vision of the turnaround and our customers for their patience .”
The chief executive said Cell C will have achieved significant debt reduction by day one after the digest.
“I can humbly say to all South Africans that Cell C is ready to invest in providing great value to our customers – which has been a hallmark of our heritage for over 21 years – but now we can truly say that we have a quality network with access to more than 8,775 sites, with 96% LTE enabled by the end of August 2022 and more by the end of 2023.”
He said that in the short to medium term, Cell C will focus on implementing its network migration by the end of 2023 to take us to 14,000 sites.
It will also focus on wholesale, pursuing its ambition to become a digital company and building a high-quality culture with digital skills for employees.
Cell C . Debt Restructuring
To facilitate the restructuring of Cell C’s debt to certain secured lenders, totaling R7.3 billion (fixed as of November 2019), Blue Label will provide liquidity through a R1.46 billion secured loan;
A portion of R1.03 billion of this debt financing will be used to pay off the secured lenders under the accepted compromise offer of 20c for each R1 debt.
Secured lenders who have chosen to remain invested in cell C will borrow an amount equal to the 20c received from the compromise offer under a new loan arrangement called the reinvestment instrument.
This new loan arrangement is interest-bearing, secured and gives a total nominal capital value equal to 2.75 times (or 55c) of the amount advanced.
All participating lenders in the new loan will have the right to share pro rata in a new issue of common stock in cell C at par value. All current shareholders will be proportionately diluted to enable this new issuance of ordinary shares.
The Prepaid Company (TPC), a subsidiary of Blue Label, will hold 49.53% of the shares in cell C upon completion of the restructuring.
In addition, an amount of R1.1 billion owed by Cell C to Comm Equipment Company will be deferred and repaid in equal monthly installments over a 60-month period.
TPC buys prepaid airtime from Cell C worth R 1.2 billion (including VAT). In addition, TPC will purchase four quarterly airtime payments worth R300 million. TPC will raise R1.6 billion of the required funds from financial institutions, the settlement of which is to be repaid in equal monthly installments over a 24-month period.
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