Blue Label co-CEO Brett Levy has announced that the company is nearing a deal to acquire a US$25 million loan owed to international investment fund Gramercy by Cell C. This update was shared during a media briefing following Blue Label’s interim financial results for the half-year ending November 30, 2024.
Earlier in November, Blue Label revealed that its subsidiary, The Prepaid Company, which is the majority stakeholder in Cell C, had finalised a binding term sheet with Gramercy to purchase the loan for US$24 million. The Prepaid Company holds a 63.19% economic interest in Cell C, although its voting rights are currently limited to under 50% pending approval from the Competition Tribunal for control of the mobile operator.
Levy elaborated that Gramercy is comprised of various combined funds and a significant UK corporate pension fund. Notably, a loan agreement between Cell C and Gramercy was established on September 21, 2022. The loan carries an interest rate of 10% per annum, with a repayment deadline of March 31, 2026.
The purchase price for this claim will be settled in four non-interest-bearing instalments of US$6 million. Payments will occur on the transaction’s closing date, November 30, 2025, as well as on March 31 and November 30 2026.
Despite the negotiation progress, Blue Label indicated that several necessary conditions were not fulfilled by November 30. When asked about the outstanding conditions, Levy mentioned that they are awaiting approval from the South African Reserve Bank concerning the foreign currency transaction, which they anticipate receiving soon.
In a separate yet related transaction, The Prepaid Company and Gramercy have signed a binding term sheet for a share acquisition in Cell C. Under the agreement, The Prepaid Company will buy Gramercy’s 6.09% stake, totalling 88,939,299 shares, for US$ 327,435. Similar to the loan, this transaction will be settled in four equal, non-interest-bearing cash instalments and funded through existing resources or cash facilities over the same timeline in 2025 and 2026.
However, unlike the debt transaction, the share purchase will require clearance from the Competition Tribunal and the Independent Communications Authority of South Africa. Levy emphasised that approval from the Competition Tribunal is crucial for The Prepaid Company to obtain a controlling stake in Cell C.
“Gramercy’s involvement also included a notional equity stake in Cell C, which functioned as a form of security,” Blue Label explained.
Cell C has undergone two recapitalisation processes to avoid bankruptcy. The latest restructuring included a significant cash infusion from The Prepaid Company and provided debt holders with two options:
- Accept an 80% reduction in their investment.
- Retain their status as debt holders in the restructured Cell C with a 45% reduction, receiving the remainder over subsequent years.
Blue Label specified that the latter route involved greater risk and potential reward, which Gramercy chose to pursue. “It’s essential to highlight that Gramercy’s stake in Cell C was primarily debt-based. Therefore, it’s misleading to derive an equity value from the transaction concerning Gramercy’s equity in Cell C; their success should be assessed based on the value relative to their post-recapitalisation debt investment,” concluded Blue Label.
