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Cell C withdraws bond placement

Company confident it can reduce debt through planned restructuring.

Cell C has withdrawn a planned bond placement to help it reduce its high levels of debt, but the company remains confident it will raise sufficient funds through a planned restructuring to reduce its maximum net borrowings to below R8 billion.

The bond placement had been a condition of the proposed transaction in which Blue Label Telecom would acquire 45% of Cell C’s equity for R5.5 billion.

As detailed in the transaction announcement, a condition precedent to the proposed transaction was the completion by Cell C of a bond placement process which, taking into account the amounts payable by the other investors, would result in its existing net borrowings, comprising any contractual obligations pertaining to monies borrowed, including shareholder loans, less cash and cash equivalents, being reduced to a maximum of R8 billion,” Blue Label told shareholders on Tuesday via a statement on the JSE’s stock exchange news service.

But Blue Label said Cell C has assured it that the maximum net borrowings target of R8 billion is expected to be achieved without the need to do so via a bond placement. 

Neither company has provided further details.

TechCentral has asked Cell C for insight into how it plans to achieve its debt target in the absence of the bond placement and will update this article once this information has been received.

In October, Blue Label revealed Cell C’s detailed financial results for the first time in a circular to shareholders. The numbers showed that the mobile operator had net debt at the end of 2015 of R20 billion, from R14.3 billion in 2014.

Its total liabilities exceeded its total assets by R12.2 billion as at end-June 2016. However, the company and its shareholders have “demonstrated that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities will occur in the ordinary course of business”.

Cell C turned a small profit of R2.8 million in the six months ended June 30 2016, an improvement from a loss of almost R1.2 billion in the same six-month period a year earlier.

The circular revealed that in the first six months of 2016, Cell C recorded revenue just shy of R7 billion, up from R6 billion a year ago.

This article was first published on TechCentral. To access the original, please click here.

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