Blue Label's shares surged on the JSE yesterday by almost 6% after it announced that it had finished the recapitalisation of mobile operator Cell C and its financial stakeholders.
Blue Label shares traded at R6.60 and have increased by 13.84% in the past year.
Blue Label said it had concluded the binding long- form agreements. Cell C will be restructured and refinanced to deleverage its balance sheet, providing it with liquidity with which to operate and grow its businesses and to position itself to achieve long-term success for the benefit of its customers, employees, creditors, shareholders and Cell C's other stakeholders.
Cell C implemented a turnaround strategy in 2019, focusing on operational efficiencies, reducing operational expenditure and optimising traffic.
“This includes a significant reduction in capital expenditure and a conversion of a fixed cost infrastructure-based network to a variable operational expenditure model. This, together with the recapitalisation of the current debt structure, will result in a significant improvement of its liquidity and ensure the long-term sustainability of Cell C,” the group said.
Blue Label said, from its perspective, the recapitalisation of Cell C, together with the benefits to be derived from Cell C’s turnaround strategy and its sustainability, would enhance the value of its investment therein and restore its shareholder value.
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 would provide liquidity via a secured loan of R1.46bn.
A portion of R1.03bn of this debt funding would be used to pay out the secured lenders as per the accepted compromise offer of 20c for every R1 of debt.
The Prepaid Company (TPC), a Blue Label subsidiary, will hold 49.53% of shares in Cell C after the completion of the restructuring; TPC will purchase Cell C prepaid airtime to the value of R1.2bn, including VAT,.
"In addition, TPC will purchase four quarterly payments of airtime to the value of R300m, including VAT. The first payment will be at the beginning of the 13th month following the recapitalisation of Cell C," Cell C said.
According to Cell C, the R1.1bn it owed to Comm Equipment Company, a wholly owned subsidiary of TPC, will be deferred and repaid in equal monthly instalments over 60 months.
Blue Label’s joint CEO, Brett Levy, said: “This has been a long, often difficult and drawn-out process, involving various local and international partners and creditors and, while it took longer than expected, we are relieved that all could finally agree to put the future and sustainability of Cell C first and that we can now put Cell C on a path to profitability and growth.”
Levy said with the recapitalisation finally completed, Blue Label would continue to focus on improving its service and product offering to all its clients, growing its market share and footprint.
Cell C CEO Douglas Craigie Stevenson said: “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.”
He said day one post recapitalisation, Cell C would have achieved a significant reduction in the debt of the business to enable it to move forward and make it more streamlined as a new, reinvigorated, and fit-for-purpose entity to compete in the dynamic and changing telco landscape.
Looking forward, Stevenson said Cell C’s operational focus would be to finish the implementation of the network migration by the end of 2023 to get us to 14 000 sites.
Cell C will hold a market update on Thursday, September 29.
BUSINESS REPORT