Remgro’s DFA entangled in Cell C and Blue Label SPV web

Dark Fibre Africa (DFA), a subsidiary of Remgro-owned Maziv, has become linked to a Blue Label Telecoms special-purpose vehicle, which owns 10% of Cell C.

During the 2023 financial year, Cell C’s debt to DFA was transferred into a new SPV in exchange for a 10% shareholding in Cell C.

The special-purpose vehicle, SPV5, is required to repay the debt of R275 million in tranches from 31 December 2024 to 31 December 2026.

Blue Label Telecoms, which has a 63.19% effective economic interest in Cell C, issued a guarantee in favour of DFA to repay its debt by SPV5.

At the same time, Blue Label-owned TPC agreed to provide SPV5 with the necessary funding to make the payments of R275 million to DFA. In return, it received a claim of R699 million in SPV5.

TPC’s loan will be repayable on demand at an amount equal to:

• The capital advance of R275 million, plus
• R424 million, plus
• 50% of the fair value of the Cell C shares held by SPV5 in excess of the R699 million.

The Cell C shares held by SPV5 are pledged as security in favour of TPC. However, SPV5 can sell the Cell C shares before TPC gives it any funds, provided the net proceeds exceed R375 million.

If SPV5 disposes of its shares in Cell C, R275 million of the net proceeds must be used to settle the lessor, and R100 million is to be paid to TPC as an irrevocable and unconditional break fee.

Once TPC has advanced funds to SPV5, SPV5 is precluded from selling the Cell C shares without TPC’s consent. However, TPC has no voting rights attached to the shares.

In the event of default, TPC could acquire the 10% shareholding in Cell C in the settlement of its loan.

This will only be with the prior approval of the Competition Commission of South Africa and ICASA, as such acquisition would result in TPC acquiring control of Cell C.

SPV5 is the latest special-purpose vehicle linked to a complicated web of special-purpose vehicles created by Blue Label related to its Cell C shareholding.

SPV1 and SPV4, for example, are entitled to obtain an additional 13.55% of shares in Cell C at any time from the SPVs in settlement of the loans.

It gets more complicated. TPC advanced R223 million to SPV4, which it used to buy 5.47% of the shares in Cell C from Magnolia Cellular Investments 2, which is in liquidation.

SPV3 has not been mentioned in Blue Label’s recent financial statements, and finding any information, and even whether it exists, is difficult.