The agreement with Cell C’s shareholders and creditors is a final and critical step in the mobile operator’s turnaround plan which included deleveraging its balance sheet and providing cash to operate.
Shares of Blue Label, which bought a 45% stake in Cell in 2017, were up 5.6% at 6.60 rand 0744 GMT following the announcement.
Blue Label has been trying to get Cell C out of debt since buying the stake. It said in a statement that the recapitalization of Cell C will enhance the value of its investment and restore shareholder value.
Under the agreement, The Prepaid Company (TPC), a subsidiary of Blue Label, will lend Cell C R1.03 billion to settle claims of secured creditors by paying 20 cents for each Rand of debt, in accordance with the accepted offer in compromise, said Blue Label.
Secured lenders who chose to remain invested in Cell C will lend the carrier an amount equal to the Offer in Compromise under a new loan arrangement, he added.
“This new loan arrangement will be interest-bearing, secured and will yield a total face value equal to 2.75 times the amount advanced,” Blue Label said.
Additionally, all creditors participating in the new loan will receive shares of Cell C. The carrier will also put Blue Label shares through a rights issue, increasing its stake to 49.53%.
To further help Cell C meet its working capital needs, PTC will purchase Cell C’s prepaid airtime for a total of R1.5 billion. Other agreements call for PTC to raise 1.6 billion rand of the necessary funds from financial institutions, according to the statement.
“On the first day after the wrap-up, Cell C will have achieved a significant reduction in debt to the business to allow us to move forward and make the business more streamlined,” said Cell C’s chief executive. , Douglas Craigie Stevenson.
($1 = R17.7557)