Blue Label Telecoms Restricted
(Integrated within the Republic of South Africa) (Registration quantity 2006/022679/06) Share code: BLU
ISIN: ZAE000109088
(“Blue Label”)
WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT AND ANNOUNCEMENT REGARDING THE RECAPITALISATION OF CELL C LIMITED (“Cell C”)
1. INTRODUCTION
Shareholders are suggested that Blue Label has concluded a non-binding time period sheet (“Umbrella Restructure Time period Sheet“) with Cell C and varied Cell C monetary stakeholders (together with sure shareholders and collectors of Cell C).
By way of the Umbrella Restructure Time period Sheet, Cell C might be restructured and refinanced (the “Proposed Transaction”) with the aim of deleveraging its stability sheet, offering it with liquidity with which to function and develop its companies and to place itself to realize long run success for the good thing about its clients, staff, collectors, shareholders and its different stakeholders.
The Umbrella Restructure Time period Sheet is non-binding, save for stand-still provisions and sure provisions of a common nature that are binding. The lengthy type agreements, which might be binding, are presently in technique of preparation and can incorporate the phrases and situations contained within the Umbrella Restructure Time period Sheet.
2. RATIONALE FOR THE PROPOSED TRANSACTION
Cell C has carried out a turnaround technique, specializing in operational efficiencies, lowering operational expenditure and optimising site visitors. This features a important discount in capital expenditure and a conversion of a set value infrastructure primarily based community to a variable operational expenditure mannequin. This, along with the recapitalisation of the present debt construction, will end in a major enchancment of its liquidity and guarantee the long run sustainability of the corporate.
From a Blue Label perspective, the recapitalisation of Cell C, along with the advantages to be derived from Cell C’s turnaround technique and its sustainability, will improve the worth of its funding therein and in flip restore its shareholder worth.
3. SALIENT TERMS OF THE PROPOSED TRANSACTION
The salient phrases of the Proposed Transaction pertaining to TPC (a wholly-owned subsidiary of Blue Label), or its nominee (“TPCN“), are set out under –
Capital and debt restructure:
To be able to facilitate the restructuring of Cell C’s debt owing to sure secured lenders totaling c.ZAR 7.3 billion, with such quantity being mounted as at November 2019, TPCN shall mortgage to Cell C an quantity required to have an effect on a compromise supply to be made by Cell C to sure of its secured lenders of a most quantity of as much as ZAR 1.46 billion (“TPCN Debt Funding“). It’s anticipated that TPCN’s precise funding obligation in respect of the compromise supply will, nonetheless, quantity to ZAR 1.03 billion.
The TPCN Debt Funding might be offered by TPCN to Cell C within the type of a secured mortgage. Cell C will utilise the TPCN Debt Funding to settle the claims of secured lenders by paying an quantity of 20c to the ZAR.
Sure secured lenders have indicated that they want to stay invested in Cell C. These secured lenders might be entitled to mortgage an quantity equal to the 20c obtained, again to Cell C below a brand new mortgage association (“Reinvestment Instrument“). The Reinvestment Instrument, which might be curiosity bearing and secured, could have an mixture capital face worth equal to 2,75 occasions of the quantity superior. As well as, the collaborating lenders might be entitled to share pro-rata in a recent concern of odd shares in Cell C at a nominal worth. All shareholders of Cell C will dilute proportionately to allow the issuance of those odd shares to the collaborating lenders.
Concurrently however individually with the issuance of the Reinvestment Instrument, Cell C will, pursuant to a rights concern at nominal worth, allot and concern shares to TPCN. Following such concern and varied different problems with shares to be made by Cell C to 3rd events at nominal worth pursuant to the Proposed Transaction, TPCN will maintain roughly 49.3% of the shares in Cell C, inclusive of these shares which TPCN might be entitled to, pursuant to the Reinvestment Instrument.
As well as, CEC (an entirely owned subsidiary of TPC) will defer an quantity of ZAR 1.1 billion owed by Cell C and a few of its subsidiaries to it on the date of implementation of the Proposed Transaction (“the Efficient Date“), which quantity might be repaid in equal month-to-month installments over 60 months reckoned from the Efficient Date. The precise Efficient Date shall be as soon as all situations precedent to the Proposed Transaction have been fulfilled or waived.
Liquidity necessities:
To be able to additional help Cell C with its working capital necessities, TPC shall –
- buy Cell C pre-paid airtime for a purchase order value of ZAR 1.2 billion (inclusive of VAT) on the Efficient Date; and
- buy, by the use of 4 additional quarterly funds of ZAR 300 million (inclusive of VAT), extra pre-paid airtime, with every such quarterly cost payable initially of every calendar quarter. The primary such quarterly cost might be made initially of the thirteenth month following the recapitalisation of Cell C and subsequent funds might be made on the graduation of every quarter thereafter.
Moreover, at the side of different third events, TPC shall undertake to buy sure minimal ranges of pre-paid airtime from Cell C in accordance with an agreed month-to-month schedule or in any other case in accordance with market necessities.
The pre-paid airtime to be acquired by TPC from Cell C pursuant to the above pre-paid airtime transactions, varieties a part of the typical month-to-month pre-paid airtime acquisitions by TPC of Cell C pre-paid airtime within the odd course of enterprise.
TPC will increase c.R1.6 billion of the required funds from monetary establishments, by an Airtime Buy transaction, for the aim of facilitating the Proposed Transaction, and could have an obligation to repurchase such airtime over a 24 month interval in equal month-to-month instalments. The monetary establishments have offered the requisite credit score approvals in respect of the airtime buy transaction, that are topic to inter alia the situations set out in paragraph 4 under, referred to within the SENS announcement revealed by Blue Label on 26 August 2021.
Different inter-related transactions:
Along with the conclusion of the Umbrella Restructure Time period Sheet, the next transactions might be carried out and agreements in respect thereof have been concluded (conditional upon the Proposed Transaction) being unconditional (save for situations associated to such preparations being unconditional or carried out) whereby TPCN will purchase:
- from sure funders to Cell C their proper to reinvest within the Reinvestment Instrument out there to them for a purchase order consideration of ZAR 1 from every such funder. Following such acquisition by TPCN of such rights, TPCN will make investments an mixture quantity of ZAR110 million into Cell C through the Reinvestment Instrument;
- debt notes in Cedar Mobile Funding 1 (RF) Proprietary Restricted, a shareholder in Cell C, for a purchase order consideration of US$500,000 and ZAR 16 million;
- a credit score declare of US$6 million towards Cell C for an quantity of US$4 million, and which declare will then be topic to a compromise as between TPCN and Cell C;
- sure commerce claims towards Cell C, which claims shall be acquired for an mixture quantity of ZAR 16 million and US$4.5 million and which claims will then be topic to a compromise as between TPCN and Cell C.
4. CONDITIONS PRECEDENT
The Proposed Transaction is topic to the fulfilment of assorted situations precedent. The situations precedent to the Proposed Transaction are customary situations precedent to a transaction of this nature, and embody:
- Blue Label and TPC concluding essential funding agreements and Airtime Buy agreements with its funders to lift essential funding for it to take part within the Proposed Transaction (and such agreements turning into unconditional in accordance with their provisions);
- there being an absence of a “materials antagonistic impact”;
- TPCN being happy that the Proposed Transaction might be carried out considerably in accordance with the transactional construction and phrases of the Umbrella Restructure Time period Sheet;
- TPCN holding (or being happy it should maintain) not lower than 45% of the issued share capital of Cell C on closing on phrases and situations acceptable to TPCN;
- all essential third celebration consents for the Proposed Transaction being obtained unconditionally or on situations acceptable to TPCN;
- all required regulatory and statutory approvals being obtained unconditionally or on situations acceptable to TPCN; and
- essential shareholder and board consents and resolutions by Cell C and, if relevant, TPCN and Blue Label being obtained.
5. FINANCIAL INFORMATION
Cell C’s Earnings earlier than Curiosity and Taxation (EBIT) for the six month interval ended 30 November 2021 amounted to ZAR 862 million. After accounting for inter alia finance prices of ZAR 791 million and foreign exchange losses of ZAR 923 million, the online loss after tax amounted to ZAR 849 million. It must be famous that finance prices and foreign exchange losses might be diminished going ahead on account of the Proposed transaction.
Web adverse property for the six month interval ended 30 November 2021, amounted to ZAR 13.7 billion.
6. CATEGORISATION OF THE PROPOSED TRANSACTION
The Proposed Transaction has been categorised as a class 2 transaction when it comes to the JSE Listings Necessities.
7. WITHDRAWAL OF CAUTIONARY
Shareholders are referred to the Cautionary Bulletins launched on SENS, the final one dated 16 February 2022, and are suggested that as all out there particulars referring to the Proposed Transaction have been launched, warning is not required to be exercised when buying and selling in Blue Label Shares.
Sandton
15 March 2022
Monetary Advisor and Sponsor:
Investec Financial institution Restricted
Authorized Advisor to Blue Label:
Werksmans Inc