Germany’s second-largest cable network operator close to deal with investors Morgan Stanley and United Internet
Media reports over the weekend confirm Tele Columbus, operating under its PŸUR brand, is close to securing new €200m cash injection, plus a debt maturity extension until 2028. The funds are coming from an infrastructure fund from Morgan Stanley and United Internet, which adds to around €100m of funds previously committed.
The owners of the cableco, which operates main in the east of the country, have been working for months to find a way to refinance its debt. According to BNN Bloomberg, the company has been struggling with cash burn due to investment in an ambitious fibre rollout plan in Germany.
In return for the cash injection, the lenders want to extend a €462m loan – originally due in October next year – and a high-yield €650m bond until 2028. The cableco’s time for refinancing was running out, even though the loan wouldn’t have been due for another year and the bond until May 2025. The takeover vehicle Kublai GmbH, which holds almost 95% of Tele Columbus, is 60% owned by Morgan Stanley and 40% by the previous major shareholder United Internet.
Morgan Stanley committed to the cableco two years ago with the understanding that Tele Columbus would invest more than €2bn in expanding and upgrading the cable network within a decade.
In a statement issued over the weekend the cableco confirmed it was in advanced discussions about the refinancing of its financial liabilities. In connection with these discussions, the company said it has not paid the coupon of its senior secured bonds of €650m due 2 November 2023. There is a 30-day grace period for the payment of the coupon. The company said it has the necessary funds to meet all its payment obligations.
Tele Columbus told BNN Bloomberg it “will provide an update in the coming days as further milestones are reached.”
Without fresh money, Tele Columbus could have struggled with liquidity towards the end of the year, according to its own financial statements. According to media reports, at the end of June, liquid assets were still at €34m euros, but in the first half of the year alone they had fallen by €70m.
With its cable and fibre optic networks, Tele Columbus reaches more than three million households in Germany. In the first half of the year, sales fell slightly to €221.3m, as did EBITDA, to €86.8m. Interest and depreciation pushed Tele Columbus into the red again, writes WirtschaftsWoche.
Negative cash flow
In May ratings agency Fitch revised Tele Columbus’s outlook to negative from stable suggesting its “significant investments” resulted in negative free cash flows, contributing to a weak underlying performance in its Q2 results.
Although the company had a €75m equity injection at the end of 2022, Fitch stated that without further financing, or some “cash-preservation measures” it would result in a “thin liquidity buffer, which could exacerbate refinancing risks ahead of key debt maturities from October 2024.”
Under its fibre strategy, Tele Columbus plans to spend €2bn over 2021-2030 to upgrade its HFC infrastructure to fibre, implying more than €200m capex per year. Fitch said this “significantly exceeds” the current organic EBITDA generation.