JSE-listed Blue Label Telecoms says it has entered into a ‘binding umbrella restructure agreement’ with Cell C, debt providers of the mobile operator, a third party investor, and other relevant parties to ensure that its acquisition deal goes ahead.
Bloomberg reported last week that Telkom was again considering a bid of $1 billion (around R13 billion) for Cell C. However, Cell C said it is committed to its deal with Blue Label, which was initially announced as far back as December 2015.
In October last year, Blue Label said it would up its stake in Cell C with a R5.5 billion payment for 45% of the company, up from R4 billion for a 35% stake it originally offered.
In a statement to shareholders on Monday (27 February), Blue Label said the binding agreement would involve the following:
- The maximum Net Borrowings of Cell C will be reduced to approximately R6.0 billion
- The third party investor is to subscribe for 15% of the share capital of Cell C for R2.0 billion
- Blue Label’s subscription for 45% of the share capital of Cell C remains unchanged.
“The binding restructure agreement is subject to the conclusion of the relevant transaction agreements, which agreements are expected to be unconditional by no later than 30 June 2017,” the telco said.
Earlier in February, S&P Global downgraded Cell C’s corporate credit rating after missing an interest payment on its senior secured bonds.
S&P however, did note that Cell C was in the process of restructuring its debt in an acquisition deal involving Blue Label and other shareholders.
“As such, the current downgrade will be reviewed if and when a deal materialises,” the ratings firm said.
Following the statement from Blue Label, by 13h45 shares in the company jumped 4.6% to R18.61.
Cell C also confirmed in a separate note that it had signed a Restructuring Agreement with its key lenders, majority bondholders and new equity investors, which will see the company reduce its debt to approximately R6 billion.
“The agreement sets out the framework and agrees the key principles by which the debt will be reduced through a combination of fresh equity injections and an exchange of Cell C debt for equity,” the operator said.
Cell C highlighted the following lenders including Nedbank, Industrial and Commercial Bank of China (ICBC), China Development Bank and the majority of Euro Bondholders.
The completion of the transaction is subject to the execution of detailed formal agreements and the obtaining of all requisite regulatory approvals.