Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Gigaclear, a heavily indebted UK broadband provider, has launched a sale process as investors and creditors including NatWest, Lloyds and the National Wealth Fund try to resolve a £1bn debt pile.
Potential buyers received teaser documents earlier this week, according to three people familiar with the matter. The process comes as Gigaclear’s creditors seek a solution to their investment, which soured after an expected equity injection from Equitix failed to fully materialise in 2023.
Other options include writing down debt, a debt-for-equity swap or a further cash injection from investors that include main shareholder Infracapital and Railpen, according to a person familiar with the process. They added that Gigaclear’s operations would not be affected regardless of the outcome.
Gigaclear, which is available in more than 500,000 homes and has about 160,000 customers, could fetch between £500mn and £700mn, New Street Research has estimated.
The dozens of small broadband companies or alternative network providers set up to challenge BT’s Openreach and Virgin Media O2 are now grappling with a collective £8bn debt pile, according to estimates from Enders Analysis, as well as fewer customers than hoped.
Gigaclear’s restructuring process may involve the first major writedown of debt in the “altnet” sector, and would come after lenders including NatWest and Lloyds set aside provisions to account for losses in the sector. TMT Finance first reported the restructuring.
Taxpayers stand to take a hit in any writedown as the National Wealth Fund gave a £240mn guarantee as part of a wider £1.5bn debt package in 2023. The fund has committed more than £1bn to altnets, according to a person familiar with the matter.
The fund said it continued “to be supportive of the business in exploring ways to raise capital and deliver a sustainable capital structure for the company in order to grow value”.
Potential buyers for Gigaclear could include the industry’s largest player, CityFibre, according to a person familiar with the matter. Any buyer is likely to want a reduction of the altnet’s debt levels before any deal, they added.
The Financial Times reported earlier this week that Virgin Media O2 was in talks about acquiring the UK’s fourth-largest broadband network, Netomnia, in a potential £2bn deal. CityFibre has also expressed interest in the business.
New Street analyst James Ratzer said the “combination of high build costs and low customer take-up” meant the business was unlikely to have any equity value.
“Trying to sell a business with no equity value when equity backers and creditors both want a share of any proceeds is very challenging to complete,” he added.
Gigaclear said it continued to deliver “strong operational performance” and was “delivering on all key financial metrics”.
“Our existing stakeholders remain supportive of the business, and we continue to work constructively with them to explore a range of options that support the long-term success of Gigaclear and deliver the best outcome for all parties,” it added.
Equitix said it had invested £50mn in Gigaclear in late 2023 that had “unlocked £1bn in senior debt” and was disappointed that the “financial performance of the investment did not meet the targets that Gigaclear set itself”.
Infracapital, Railpen, Lloyds, NatWest and CityFibre declined to comment.