EXCLUSIVE: ECA lenders saved from wipeout as Smile Telecoms avoids liquidation

Smile Telecom has been saved from the brink of liquidation after its majority shareholder issued a last-minute waiver to conditions attached to its new money proposal.

In a move unusual for a development lender, aggressive brinksmanship from South Africa’s Public Investment Corporation to the proposed restructuring threatened to tip the company into liquidation unless it received payment due under a share put option worth $45 million.

The success of the plan hinged on an agreement between the company’s majority shareholder, Al Nahla, and South Africa's Public Investment Corp, or PIC, acting on behalf of the Government Employees Pension Fund, or GEPF, which is also a small minority shareholder. GEPF holds a put option (exercised on 24 Dec, 2020) entitling it to sell its shares in the company to Al Nahla entities for $45 million. One condition attached to $51 million new money being provided to Smile under the restructuring plan was that GEPF extend its put option by 12 months to 31 March, 2022.

In the standoff that ensued, PIC prevailed over the shareholder and will received its $45 million due under the put option.  As a result of the compromise the English High Court sanctioned the restructuring plan on 30 March. The effect of the plan is intended to stabilise the group’s financial position and enable it to participate in a controlled asset disposal and sale process for stakeholders.  Returns to senior ECA lenders under the plan is estimated at 93.4% by Grant Thornton. Had the company been forced into liquidation, lenders would likely have received nothing.