Blue Label completes recapitalisation of Cell C
Blue Label Telecoms says it has concluded the recapitalisation of Cell C through a binding long-form agreement with the mobile operator and various financial stakeholders.
In mid-2019, Cell C embarked on a turnaround strategy, focusing on operational efficiencies, reducing operational expenditure, and optimising traffic.
This included a move away from a capital-intensive build-and-own network model to an infrastructure sharing model which provides variable operational expenditure and is scalable, Blue Label noted.
“Together with the recapitalisation of the current debt structure, it will result in a significant improvement of liquidity and ensure the long-term sustainability of Cell C,” it said in a statement on Thursday (22 September).
Douglas Craigie Stevenson, Cell C CEO, said: “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.”
“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 turnaround and our customers for their patience.”
The chief executive said that on day one post-recap, Cell C will have achieved a significant reduction in the debt.
“I can say with humility to all South Africans, Cell C is ready to invest in offering our customers great value – which has been a hallmark of our legacy for more than 21 years – but now we can also truly claim to have a quality network with access to more than 8,775 sites, 96% of which are LTE enabled as at end August 2022 and more to come by the end of 2023.”
He said that in the short-to-medium term, Cell C will focus on the implementation of its network migration by the end of 2023 to get us to 14,000 sites.
It will also target the wholesale business, pursue its ambition to become a digital business and build a high-performance culture with digital skillsets for employees.
Cell C’s debt restructure
To facilitate the restructuring of Cell C’s debt owed to certain secured lenders, totalling R7.3 billion (fixed as of November 2019), Blue Label will provide liquidity via a secured loan of R1.46 billion;
A portion of R1.03 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 the completion of the restructuring.
Additionally, an amount of R1.1 billion owed by Cell C to Comm Equipment Company will be deferred and repaid in equal monthly instalments over 60 months.
TPC will purchase Cell C prepaid airtime to the value of R1.2-billion (including VAT). In addition, TPC will purchase four quarterly payments of airtime to the value of R300 million. 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.
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