Debt-saddled mobile operator Cell C has, once again, failed to service its debt.
In a statement issued today, Blue Label, Cell C’s biggest shareholder, notified the markets that Cell C has again defaulted on the payment of capital on its $184 million note which was due on 2 August.
It also includes interest and capital repayments related to the respective bilateral loan facilities between Cell C and Nedbank Limited, China Development Bank Corporation, Development Bank of Southern Africa, as well as Industrial and Commercial Bank of China, which were due in January and July.
Blue Label says: “Currently, none of the bilateral loan facilities have been accelerated as noteholders are aware and support that Cell C is committed to resolving the situation by agreeing to restructuring terms with its lenders while it also continues to work proactively with all stakeholders to improve its liquidity, debt profile and long-term competitiveness.”
Similarly, Cell C says: “While a new recapitalisation is being negotiated, there is an informal debt standstill and debt payments have been suspended.”
It adds that although Cell C's lenders are entitled to call up the entire debt owed, “they have not accelerated debt payments and have held off on taking action in order to facilitate a commercial solution".
According to Cell C, the non-payment is not a surprise to lenders that understand the Cell C turnaround strategy.
“There is belief in Cell C’s long-term prospects, and the new leadership team is focused on the journey to turn the company into a profitable, innovative player in the local telecoms industry and is confident the organisation will overcome its challenges,” says CEO Douglas Craigie Stevenson.
Cell C says it continues to work proactively with all stakeholders to improve its liquidity, debt profile and long-term competitiveness as part of its turnaround strategy.
It says the turnaround strategy is focused on ensuring operational efficiencies, restructuring the balance sheet, implementing a revised network strategy and improving overall liquidity.
Cell C has been facing a bleak picture because of its debt woes as well as lack of capital, which analysts warned is a toxic cocktail, and may lead to total collapse of the telco.
In December, the operator also defaulted on payment of interest on its loans.
It missed an interest payment on a R2.7 billion ($184 million) loan, as well as capital plus interest payments on loan facilities with Nedbank, China Development Bank Corporation, Development Bank of Southern Africa, and Industrial and Commercial Bank of China.
The telco has consistently under-performed, incurring R33 billion in losses over the years.
Last year, Cell C recorded a R4.2 billion loss and in 2018 losses were R7.3 billion.
Cell C has since implemented a turnaround strategy from March 2019 onwards and claims it is paying off.
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