Cell C compromise creditors to vote on arrangement at June 28 meeting

By Caroline Salls

Pittsburgh, June 21 – Cell C (Pty) Ltd.’s compromise creditors will be asked at a June 28 meeting to approve an arrangement under the Companies Act, 71 of 2008, according to a notice to the holders of the company’s €400 million of 8 5/8% first-priority senior secured notes due 2018.

Cell C also plans to seek recognition of the South African

“Cell C is technically insolvent and financially distressed,” according to the notice.

The company said it has been in negotiations with various stakeholders for more than 18 months with the objective of restructuring its debt and completing an equity restructure.

Cell C said the objective of the restructuring is to reduce its debt to roughly R6 billion from R24 billion and to introduce fresh capital into the business through Blue Label Telecoms Ltd. and Net 1 Applied Technologies South Africa (Pty) Ltd. as equity partners.

On the equity side of the restructuring, the company said Blue Label will acquire a 45% stake in Cell C through Blue Label’s wholly owned subsidiary The Prepaid Co., and Net 1 will acquire 15%.

Cell C staff and management will acquire 10% of the equity.

In addition, Albanta Trading 109 (Pty) Ltd. will acquire a 49% interest in OTSA, 3C Telecommunications (Pty) Ltd., the existing owner of 100% of the Cell C equity, will dilute and subscribe indirectly for 30% through three special purpose vehicles.

Following the implementation of the restructuring, Cell C said more than 30% of its equity interests will be in the hands of individuals who qualify as BEE shareholders.

In consideration for the subscription of shares in Cell C, Blue Label, through Prepaid, will inject new capital for R5.5 billion. Net 1 will subscribe for a 15% equity interest for a consideration of R2 billion.

The company said the arrangement will not affect its issued securities.

Repayment and interest payments will be made to bondholders under agreements with the bondholders.

Specifically, the bondholders will receive a €17.25 million cash interest payment, a cash payment in the euro equivalent of R262 million for capital, a new three-year R2.4 million 8 5/8% Irish stock exchange-listed bond to be issued by Cell C and a new five-year 8 5/8% bond to be issued by SPV 1 in the dollar equivalent of the difference between the compromise creditors’ claims, minus the interest payment, minus the day one prepayment, minus an R79 million deferred payment to be made within six months of closing, minus the face value of the new Cell C bonds.

Cell C is a telecommunications company based in Randburg, South Africa.

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