Cell C’s landlord Attacq’s results for the six-month period ending 31 December 2022 revealed that it expects R31.1 million of Cell C’s outstanding rent not to be recovered.
Cell C rents its campus from Attacq, a real estate investment trust (REIT), and has been struggling to pay its rent because of financial difficulties.
The Cell C campus consisted of three buildings, including a walk-in centre (4921 square metres), a collaboration hub (24,955 square metres), and a warehouse (41,014 square metres).
Attacq and Cell C amended their lease agreement in 2022 in light of Cell C’s debt recapitalisation.
With the renewed lease agreement, Cell C only continue to rent the collaboration hub. New tenants will occupy the walk-in centre and warehouse.
Attacq told Daily Investor that it entered into a contractual agreement with Cell C to recover outstanding rent. The agreement is for R64 million.
The money would be paid to Attacq in two bullet payments due in 2024 and 2026. The outstanding rent would also carry 6% interest.
The payment in 2024 relates to all outstanding rent from Cell C generated before its recapitalisation. The 2026 payment relates to all outstanding rent after the recapitalisation.
Attacq also indicated that it had received a cash payment from Cell C for additional outstanding rent, which was not included in the R64 million.
However, Attacq does not expect to recover the total R64 million as it increased its expected credit loss from Cell C to R31.1 million.
An expected credit loss is trade receivables not expected to be recovered.
It should be noted that Attacq did not write off the R31.1 million. It means it will still try to recover it, but it is recorded as a provision in the financial statements as the probability of recovery is low.
Attacq’s problems with Cell C stem from the mobile operator’s major financial difficulties in recent years.
Cell C defaulted on its debt and was forced to cut staff and stop paying many suppliers, which included its landlord.
To address Cell C’s dismal financial position, it underwent a recapitalisation process to significantly cut its R7.3 billion debt burden.
It did this by offering its creditors 20c for every rand Cell C owed, lowering its debt burden to R1.46 billion.
The R1.46 billion is financed by its largest shareholder, Blue Label Telecoms, which increased its shareholding in Cell C to 49.3% following the recapitalisation.