Cred­i­tors lobby for Cell C deal

Business Day - - FRONT PAGE - Loni Prinsloo

Cell C cred­i­tors are not giv­ing up on a takeover of­fer from Telkom, which SA’s third-largest mo­bile net­work op­er­a­tor re­jected last week.

Cell C cred­i­tors aren’t giv­ing up on a takeover of­fer from ri­val Telkom, which SA’s third-largest mo­bile net­work op­er­a­tor re­jected last week.

Se­nior debt hold­ers have hired in­vest­ment-bank­ing firm Moelis & Co and cor­po­rate lawyers Lin­klaters and DLA Piper to lobby for the Telkom pro­posal, say in­formed sources.

They could block Cell C from pur­su­ing an al­ter­na­tive re­cap­i­tal­i­sa­tion plan by forc­ing the car­rier into liq­ui­da­tion or busi­ness res­cue, said the sources, ask­ing not to be iden­ti­fied be­cause talks were con­tin­u­ing.

A Telkom takeover would re­turn about 86c on the rand to lenders, while banks might have to take a hair­cut if Cell C went ahead with a trans­ac­tion in­volv­ing lo­cal in­vest­ment com­pany Buf­fet Group, they said.

Cred­i­tors were also re­quest­ing that Cell C’s board act in­de­pen­dently from ma­jor­ity share­holder Blue La­bel Tele­coms, the sources said.

“The board is con­tin­u­ously ap­proached by var­i­ous par­ties. We re­main fo­cused on ex­e­cut­ing our turn­around strat­egy,” Cell C said in re­sponse to ques­tions.

“In­de­pen­dent fi­nan­cial and le­gal ad­vis­ers have been ap­pointed rep­re­sent­ing the lenders and con­struc­tive dis­cus­sions on the re­cap­i­tal­i­sa­tion are un­der­way with them and other stake­hold­ers in re­spect of var­i­ous pro­pos­als.” Lin­klaters, DLA Piper and Moelis de­clined to com­ment, while Buf­fet Group could not be reached.

Telkom said it had not had any fur­ther com­mu­ni­ca­tion from Cell C. It’s not the first time Cell C has spurned ad­vances from Telkom, which wants to com­bine the coun­try’s two small­est net­work oper­a­tors to bet­ter compete against in­dus­try lead­ers MTN and Vo­da­com.

Af­ter run­ning into fi­nan­cial dif­fi­cul­ties in 2016, Cell C opted for a deal with Blue La­bel, which now owns 45% of the com­pany. In July, Cell C missed in­ter­est pay­ments and sus­pended fu­ture obli­ga­tions, re­sult­ing in S&P Global Rat­ings cut­ting Cell C’s as­sess­ment to de­fault. The com­pany, which gen­er­ates about R15bn in rev­enue, is strug­gling to re­pay about R9bn in debt.

“This re­struc­tur­ing in­volves con­fi­den­tial dis­cus­sions with var­i­ous stake­hold­ers, in­clud­ing Cell C’s board, share­hold­ers, fi­nanciers and pro­fes­sional ad­vis­ers,” Cell C said on Mon­day.

“We ac­knowl­edge public in­ter­est in Cell C’s re­struc­ture, how­ever, we re­quest con­fi­den­tial­ity in the process and will update the mar­ket in due course.”

Cell C agreed to an ex­tended roam­ing agree­ment with MTN in Novem­ber that will give it ac­cess to MTN’s net­work. As part of that pact, Cell C will pay as much as R5bn a year in roam­ing charges, from about R1.8bn, the peo­ple said. Lenders haven’t been given a chance to re­view the deal, they said.

86c what lenders would get in the rand with a Telkom takeover

R9bn What Cell C owes its cred­i­tors

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