Cell C R450-million loan deal

Blue Label Telecoms has announced a transaction through its subsidiary, The Prepaid Company, to buy over a R450 million loan that Cell C had with international investment fund Gramercy.

The Prepaid Company is Cell C’s majority shareholder, with a 63.19% economic interest in the mobile operator as at Blue Label’s latest financial results.

According to Blue Label, Gramercy’s beneficial owners are various commingled funds and a large UK corporate pension plan.

The company explained that Cell C and Gramercy entered into a loan agreement on 21 September 2022 under which Gramercy as a claim of R414,765,527 plus interest.

This claim is payable by the end of March 2026.

“If any proceeds are available from a quarterly cash waterfall funds flow formula calculation, then prepayments may be made before that date, but none have been forthcoming,” Blue Label stated.

Blue Label said that The Prepaid Company and Gramercy concluded a binding term sheet on 11 November 2024, which has conditions usual for a transaction of this nature.

Under the deal, The Prepaid Company agrees to acquire the Gramercy’s debt for R450,000,000, which Blue Label noted is the face value of the claim.

The claim purchase price is payable in four non-interest bearing instalments of R112,500,000 at the end of November 2025, March 2026 and November 2026.

Blue Label said these would be funded from own cash resources or existing facilities.

Should The Prepaid Company fail to make any scheduled payments, default interest will accrue on the outstanding amount at a rate of 15% per annum.

As security, The Prepaid Company will put up all of its rights, title, and interest in the debt claim, as well as any shares in Cell C that it will acquire from Gramercy in a separate transaction.

Blue Label said several conditions must be met for the debt claim transaction to proceed, including obtaining the necessary consent from its lenders, and foreign exchange approval from the Financial Surveillance Department of the South African Reserve Bank.

It must also obtain any consent required by Cell C’s memorandum of incorporation.

The transaction becomes effective on the fifth business day after the last of the conditions precedent are met.

“Having a history of supporting Cell C’s financial restructuring, this transaction further demonstrates Blue Label’s commitment to stabilising Cell C as a key player in South Africa’s telecom market,” the company stated.

“Through this transaction, TPC solidifies its position in Cell C’s capital structure, potentially leading to greater financial stability and enhanced returns.”

Acquisition of shares

As a separate transaction, which Blue Label said is not in any way inter-conditional on the debt claim deal, The Prepaid Company and Gramercy have concluded a binding term sheet for its shares in Cell C.

Under the terms of the deal, The Prepaid Company will acquire Gramercy’s 6.09% stake, representing 88,939,299 shares, for R6 million.

This will also be payable in four non-interest bearing equal instalments in cash, funded from own cash resources or existing facilities, at the end of November 2025, March 2026 and November 2026.

Should The Prepaid Company fail to make any scheduled payments, default interest will accrue on the outstanding amount at a rate of 15% per annum.

As with the debt deal, the share transaction will become effective on the fifth business day after the last conditions precedent have been fulfilled or waived.

Unlike the debt claim transaction, Blue Label said the share purchase requires the approval of the Competition Tribunal and Independent Communications Authority of South Africa.

Pictured: Blue Label co-CEOs Brett and Mark Levy.