TalkTalk has narrowly avoided collapse, securing an emergency lifeline from its billionaire founder, Sir Charles Dunstone.
Alongside other shareholders, Dunstone has agreed to inject £65 million into the struggling broadband business, a move crucial to sidestepping an impending debt default.
This initial capital infusion will be supplemented by an additional £170 million, with assets such as the Virtual1 subsidiary and internet brands Ovo and Shell being integrated into the group to bolster its financial position.
The refinancing package, which exceeds £400 million in total, also involves participation from key shareholders Toscafund and Ares Management. In return, lenders and bondholders have agreed to extend debt maturities from their original deadlines in November 2024 and February 2025 to September 2027.
In a statement, TalkTalk said: “The proposed transaction will leave the company well-funded to deliver the respective strategic plans of PlatformX Communications and TalkTalk, continuing to capitalise on their strong positions in the market.”
This bailout provides a vital reprieve for the company, which recently warned that it was on the brink of collapse under a £1 billion debt burden.
The broadband provider, which serves 3.6 million UK customers, had been in discussions to sell a stake in its wholesale division, PlatformX, to Australian investor Macquarie for up to £500 million. However, negotiations faltered, leading Sir Charles to inject his own capital into the business.
Earlier this year, TalkTalk divested its business division to a consortium of existing shareholders for £95 million and is currently exploring the potential sale of its consumer arm as part of a broader restructuring strategy.
The company’s financial woes have been exacerbated by weak trading performance amidst soaring inflation and stiff competition. Last year, TalkTalk lost 334,000 customers, with pre-tax losses swelling from £70 million to £127 million.
Regulator Ofcom has taken notice of TalkTalk’s precarious situation, initiating plans for a “supplier of last resort” regime to protect customers. Meanwhile, larger rivals, including Virgin Media O2—who engaged in preliminary talks with TalkTalk earlier this year—continue to monitor the situation closely.
This episode marks a rare setback for Sir Charles, the serial entrepreneur who also founded Carphone Warehouse. He took TalkTalk private three years ago in a £1.1 billion debt-financed deal.
In a significant leadership change, TalkTalk confirmed that Dame Tristia Harrison will step down as Chief Executive next month. She will be succeeded by James Smith, the current finance chief, while Sir Charles Dunstone will remain as chairman.
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Sir Charles Dunstone injects £65m to save TalkTalk from collapse