Cell C defaults on R3bn loans again but S&P status is intact

SA’s third biggest mobile network operator Cell C, has once again defaulted on payments of it’s more than R3bn in loans.

Cell C has struggled to make consistent profits since its launch in 2001, carrying R8.7bn in debt on its balance sheet. It has previously missed its loan payments resulting in a downgrade from ratings agencies. 

While Cell C’s lenders are now entitled to call up the entire debt owed, the operator says it has not pushed for more debt payments and has held off on taking any action. “The non-payment is not a surprise to lenders that understand the Cell C turnaround strategy,” the company said on Tuesday. 

Part of that turnaround hinges on a recapitalisation of the operator to help address its long-term debts. 

Cell C said its S&P Global status on “certain loan facilities and senior secured bonds remains unchanged at D (default)”.

The operator’s declining fortunes have resulted in its largest shareholders, Blue Label Telecoms and Net1, which together hold 60% of its equity, writing their combined R7.5bn investment down to nil. Blue Label has previously indicated it could take its 45% stake in the mobile operator down to about 30%. 

In May, Cell C received approval from competition authorities for the recapitalisation. This brings the mobile network operator one step closer to finalising its recapitalisation programme aimed at addressing the company’s almost R9bn long-term debt burden.

Such a recapitalisation will likely see Gatsby special purpose vehicle, whose owners are yet to be revealed, taking up an equity stake in Cell C. It has been widely expected that the Buffet Consortium, led by billionaire Jonathan Beare, will be taking up the stake in the mobile operator.

Details are still sketchy as to who exactly is funding this transaction and when the process will be fully complete. 

Cell C said, “Good progress in a complex recapitalisation is being made. Discussions to seek alignment among all stakeholders are being held and term sheets will need to be concluded”.

Cell C’s CEO Douglas Craigie Stevenson, said in a statement, “There is belief in Cell C’s long-term prospects, and the new leadership team is focused on the journey to turn the company into a profitable, innovative player in the local telecoms industry, and is confident the organisation will overcome its challenges.”

Cell C said recently it may cut more than a third of its staff in a bid to streamline its operations.

gavazam@businesslive.co.za