Cell C has defaulted on almost R3bn of debt, sending the share price of its largest shareholder, Blue Label Telecoms plunging more than 13% on Tuesday,(28 January 2020).
The failure to pay interest on its R274bn bond, as well as loans and interest to lenders, including Nedbank and the Development Bank of Southern Africa, will likely pile pressure on the board to speed up efforts to shore up its finances and improve its liquidity.
Blue Label Telecoms, which bought the 45percent stake in Cell C for R5.5bn in 2017, has been heavily exposed to losses in Cell C, prompting it to write down the value of its investment in Cell C to zero.
Cell C said in a statement that the suspension of payments was in line with the group's wider initiatives to improve liquidity and to restructure the company's balance sheet.
“Cell C continues to work proactively with all stakeholders to improve its liquidity, debt profile and long-term competitiveness as part of its turnaround strategy,” said the company.
It said the S&P Global status on certain loan facilities and senior secured bonds remained unchanged at D.
Meanwhile analysts believe that Cell C could re-open failed talks with Telkom, but unfortunately the terms of the transaction will likely be much less attractive.