Cell C’s creditors aren’t giving up on a takeover offer from rival Telkom, which South Africa’s third-largest mobile-network operator rejected last week.
Senior debt holders have hired investment-banking firm Moelis & Co. and corporate lawyers Linklaters LLP and DLA Piper LLP to lobby for the Telkom proposal, people familiar with the matter said. They could block Cell C from pursuing an alternative recapitalisation plan by forcing the carrier into liquidation or business rescue, said the people, asking not to be identified because talks are ongoing.
A takeover by Telkom would return about 86 cents on the rand to lenders, while banks may have to take a deeper haircut if Cell C goes ahead with a transaction involving local investment company Buffet Group, they said. Creditors are also requesting that Cell C’s board act independently from Blue Label Telecoms Ltd., which owns 45% of the company, the people said.
“Cell C and its various stakeholders, including the creditors, are working collaboratively to conclude a restructure that addresses all parties interests,” Cell C said in an email. “It is important to respect the confidentiality of these discussions. Information circulating in the public domain about these discussions should be viewed with a degree of caution. Cell C confirms that constructive discussions on the recapitalisation are underway and will update the market on all material matters in due course.”
Linklaters, DLA Piper and Moelis & Co. declined to comment, while Buffet Group could not be reached. Telkom said it hasn’t had any further communication from Cell C’s side.
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 Group Ltd. and Vodacom Group Ltd. After running into financial difficulties in 2016, Cell C opted for a deal with Blue Label.
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 R15 billion in revenue, is struggling to repay about R9 billion of debt.
Cell C agreed on an extended roaming agreement with MTN last month that will give it access to the network of South Africa’s second-largest wireless carrier. As part of that pact, Cell C will pay as much as R5 billion a year in roaming charges, from about R1.8 billion, the people said. Lenders haven’t been given a chance to review the deal, they said.
© 2019 Bloomberg L.P.