Blue Label Telecoms has concluded a non-binding term sheet with Cell C and various Cell C financial stakeholders, including certain shareholders and creditors, as part of the long-awaited recapitalisation.

The Umbrella Restructure Term Sheet will result in the restructure and refinance of Cell C to deleverage its balance sheet, provide it with liquidity with which to operate and grow its businesses and to position itself to achieve long-term success for the benefit of its customers, employees, creditors, shareholders and other stakeholders.

In an update to shareholders, Blue Label, which has a 45% shareholding in Cell C, said that, to facilitate the restructuring of Cell C’s R7.3-billion debt, subsidiary The Prepaid Company (TPC) would loan R1.46-billion to Cell C, which would settle the claims of secured lenders by paying 20c to the rand.

Certain secured lenders have indicated that they wish to remain invested in Cell C and will be entitled to loan an amount equal to the 20c received, back to Cell C under a new loan arrangement.

Cell C will, pursuant to a rights issue at nominal value, allot and issue shares to TPC, following which TPC will hold about 49.3% of the shares in the mobile operator.

To assist Cell C with its working capital requirements, TPC will also purchase R1.2-billion of prepaid airtime from Cell C, and buy, in quarterly payments of R300-million, additional prepaid airtime.

TPC, in conjunction with other third parties, agreed to buy certain minimum levels of prepaid airtime from Cell C in line with an agreed monthly schedule or with market requirements.

TPC will raise R1.6-billion of the required funds from financial institutions.

“This is a significant step in the transition to ensure a sustainable debt profile for the mobile operator,” said Cell C CEO Douglas Craigie Stevenson.

“The recapitalisation of this business is highly complex and it involves many stakeholders – we are grateful to our customers, employees and partners who have walked the road with us. We are excited about the future prospects and are poised to assume our competitive position in the market.”

The Umbrella Restructure Term Sheet sets out the general principles and remains subject to the conclusion of all legal documentation and fulfilment of all conditions precedent.