Cell C’s R8.9bn debt burden has been cited as one of the factors behind the slump in the shares of its largest investor Blue Label Telecoms in 2019 — yet the mobile operator’s bonds have staged a big comeback.
But at the same time, shares in Cell C’s largest investor, 45% owner Blue Label, have fallen out of favour. The group’s stock has retreated by as much as a third in the year to date, partly on concerns that Cell C is carrying too much debt. Takaendesa said it is also possible “that bond investors have a different view to equity investors”. He added that Blue Label’s shareholders may be concerned that their stakes will be diluted, particularly if Cell C’s mooted recapitalisation deal is done at lower valuations.
Imtiaz Suliman, portfolio manager at Sentio Capital, said the recovery of Cell C’s bonds might be explained by them being callable within the next month at par value. A callable bond can be redeemed by the issuer before it matures.“They could also have rallied on the back of news that Cell C will be able to refinance these bonds at a better level than the current 11% in dollars. Dollar funding is very expensive and they might have secured a line of local funding at better rates,” Suliman said.
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