Cell C Rejigs Debt With R2,2 Billion From China
South Africa’s third and smallest network operator has been burdened by interest-bearing euro-denominated debts that drain its cash each month, contributing to its failure to make a net profit.
The agreement with China Development Bank comes after President Jacob Zuma led a delegation of 300 businessmen on a state visit to China to strengthen relations.
The move is likely to improve the cellphone network provider's financial position and help raise funds to expand its network. Cell C is 60% owned by Saudi Oger, 25% by empowerment investors CellSaf and 15% by Lanun Securities, also a Saudi company.
Cell C said the "draw down" (one of the loan agreement instruments) under the facility will be made after the satisfaction of certain conditions precedent over the next few weeks.
"Any refinancing will be made in accordance with the terms of the indentures (governing both tranches of the company's outstanding notes), and agreements governing other outstanding indebtedness," it said, declining to provide further information.
The cash injection comes after Cell C shareholders cut the company's debt by half, by converting a R6,4bn loan into equity.
CEO Lars Reichelt said in May the recapitalisation had decreased the ratio of debt to earnings before interest, tax, depreciation and amortisation (ebitda) from 9,5 times to 4,8 times. He said the ebitda ratio of 4,8 times gave Cell C a better option for expanding the network. Cell C grew its full year ebitda by 67% to R1,4bn.
Cell C's debt situation saw rating agencies downgrading it two years ago for fear that it might not meet its debt obligation. But that changed as it started showing signs of recovery.
Cell C has 6,9-million subscribers. This year, it plans to spend R5,5bn in network expansion that includes building a high- speed network. The new network will improve its service and also provide other products. It will target high-end customers that it previously paid less attention to. It will launch its high-speed network on Friday in a phased roll-out.