Gigaclear Set to Buy More Time From Lenders to Deliver on Business Plan as Lower-Than-Expected Offers Make M&A Route Less Attractive; Shareholders Wiped Out 

U.K.-based alternative telecommunication network, or altnet, provider Gigaclear is set to buy more time from lenders to deliver on its business plan as recent takeover offers remain well below lenders’ expectations, making an M&A option less attractive, sources told Octus.

The rural-focused full fiber provider will be led by lenders, comprising National Wealth Fund, NatWest and Lloyds, while shareholders Infracapital, Railpen and Equitix will be wiped out following an unsuccessful attempt to sell the business. The lenders’ plan is to rightsize the roughly £1 billion balance sheet of Gigaclear and hold on to the business for now, sources added.

Gigaclear’s failure to attract acceptable bids is a reflection of mounting pressures on the debt-ridden altnet sector, which is grappling with high borrowing costs and infrastructure rollout. Lower customer takeup has compounded the challenges making many companies dependent on sponsors to continue funding their business plans. However, the sector’s distressed valuations and the resultant gap between bid-ask price has been one of the main points of contention stoking fears around dilution of existing equity.

Last week, industry peer G Network applied to appoint an administrator days after distressed debt specialist FitzWalter bought it from a lender-led M&A process. Shareholders Cube Infrastructure Managers and Universities Superannuation Scheme, or USS, were wiped out after lenders took control following a failed attempt to sell the business..

The outcome of G. Network’s sales process and Gigaclear lenders’ decision to run the business instead of relaunching a sale indicates the lenders are also facing potential haircuts.

Gigaclear raised a £1.5 billion debt package in December 2023, comprising about a £1 billion upfront facility and an uncommitted accordion of £500 million to boost the company’s rural roll-out. The deal was meant to support the group’s network expansion to 1 million ready for service, or RFS, premises by 2027 and place it in a robust position amid a market consolidation trend, the company said at the time.

According to its 2023 annual accounts, the upfront facility is due in September 2030 and carries a margin of between 375 bps to 500 bps over SONIA. The capital injection was secured alongside an up to £420 million equity commitment from Equitix in June 2023.

Of the £420 million equity commitment, Equitix only made a strategic, diversified investment of £50 million into Gigaclear in the fourth quarter of 2023..

“We recognize that the fibre market landscape has evolved and the focus is now on maximising profitability rather than capital expenditure to grow the networks. This shift in the market was one of the scenarios that we contemplated and to protect our investors, we limited our equity funding commitments to Gigaclear to the initial investment,” a spokesperson for Equitix previously told Octus.

According to its website, Gigalclear builds and operates the U.K.’s largest fiber-to-the-premises, or FTTP, network in hard-to-reach rural areas, often involving routing of the network under rivers and canals, across bridges and under railway lines and motorways. The group’s network is developed through commercial investment and the government-subsidised Project Gigabit program.

Gigaclear, Infracapital, Railpen and Equitix declined to comment.