Blue Label Telecoms has announced that after three years, the restructuring of Cell C’s balance sheet is complete.
The company said it has 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 to the agreements have been met.
“In mid–2019, Cell C embarked on a turnaround strategy, focusing on operational efficiencies, reducing operational expenditure, and optimising traffic,” Blue Label stated
“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 said that together with the recapitalisation of its debt, the changes would result in a significant improvement of liquidity and ensure the long-term sustainability of Cell C.
“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,” stated Cell C CEO Douglas Craigie Stevenson.
“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 that as of the recapitalisation, Cell C will have achieved a significant reduction in the business’ debt, allowing it to move forward and make the business more streamlined.
“We are well-placed to play in a market that is now made up of infrastructure buyers and sellers,” he said.
“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.”
Craigie Stevenson said Cell C can claim to have a quality network with access to more than 8,775 sites, 96% of which are LTE enabled as of end-August 2022.
“In the short-to-medium term our operational focus will be to finish the implementation of the network migration by end 2023 to get us to 14,000 sites,” he stated.
Cell C will also launch new products, specifically on prepaid.
It will also launch “a new way of doing business” and the ability to make significant moves in the wholesale business, he said.
“We have a clear path for our next journey. We will not settle, because change is part of our DNA at Cell C, and we believe we have the power to change your world.”
Blue Label said the transaction involves injecting new money to restructure Cell C’s financial and operational liabilities and stabilise the company.
“To facilitate 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,” it stated.
“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.
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,” Blue Label explained.
“All current shareholders will dilute proportionately to allow for this new issue of ordinary shares.”
Blue Label’s subsidiary, The Prepaid Company, will hold 49.53% of shares in Cell C after completing the restructuring.
An additional R1.1-billion Cell C already owes to Comm Equipment Company — a wholly owned subsidiary of The Prepaid Company — will be deferred and repaid in equal monthly instalments over 60 months.
The Prepaid Company will also buy Cell C prepaid airtime to the value of R1.2-billion.
In addition, it will 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, The Prepaid Company will buy certain levels of stock from Cell C based on an agreed monthly schedule, or in line with market requirements.
The Prepaid Company 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.