Tele Columbus Lines Up Lazard for Sale of ServCo Assets, Potential New Money Raise After €300M Shareholder Loan Fully Drawn; Bonds Down to 75 Area

Relevant Documents:
1Q’25 Presentation
1Q’25 Financial Report

German fibre network operator Tele Columbus has appointed Lazard as an advisor on a potential sale of the group’s ServCo assets, sources told Octus, formerly Reorg. The mandate may also encompass raising some new money as the group is expected to need further liquidity to execute the ambitious capital expenditure plans outlined in the business plan accompanying its distressed amend-and-extend transaction, the sources said.

The potential sale of ServCo comes after the group started a process earlier this year to separate its network services, or NetCo, and its service operations, or ServCo.

As reported, management said on its fourth-quarter earnings call on April 30 that it had completed the first phase of the separation with contracts, master service agreement and anchor tenant agreements now in place. It was heading into phases two and three, including migrating some subsidiaries and preparing the carve-out of the accounts as well as the contractual separation between the two entities and third parties, at which point more details about the performance and earnings of each entity would be disclosed.

On its first quarter 2025 earnings call last week the group did not provide much detail on the separation process, only noting that it is progressing, sources said.

While a sale of the ServCo may provide upside for investors if some proceeds are earmarked for debt repayment, questions loom over the viability of the remaining business, especially considering Tele Columbus’ small scale versus other operators in the sector, the sources pointed out.

Meanwhile, the group’s performance is yet to turn a corner more than a year after it completed its distressed amend-and-extend in March 2024, with first-quarter results worse than expected, the sources said. The group’s €636 million PIK SSNs due 2029 are currently quoted at 75.2, according to IHS Markit, having fallen about 7.5 points subsequent to the earnings.

Tele Columbus’ first-quarter results reflected its continued underperformance relative to the business plan underpinning the March 2024 A&E transaction. In our recovery analysis from April, Octus outlined that the group “will not have sufficient liquidity to execute its ambitious capital expenditure plans.” This is now confirmed, given the group has fully drawn on the €300 million shareholder loan made available via Morgan Stanley Infrastructure Partners, or MSIP, as shown in its 1Q’25 presentation. Cash as of March-end was €88.5 million..

An additional new money injection from the shareholders is unlikely, the sources noted.

The company had said in its full-year 2024 earnings call that it was considering raising additional financing opportunistically to accelerate its capex program. For 2024, capex, excluding leasing, increased by 18% year over year to €215.6 million, mainly driven by investments in network infrastructure and consumer growth, according to the company’s 2024 financial results.

In the first quarter of 2025, Tele Columbus’ top-line performance deteriorated as expected, with revenue down 6.6% year over year to €104.9 million, driven primarily by a 34.3% decline in TV revenue due to continued bulk migration churn. Although Internet & Telephony revenue increased 18.5% year over year to €57.5 million, this growth was insufficient to compensate for the structural decline in the TV segment. Normalized EBITDA declined 18% year over year to €39.1 million, significantly below the run-rate implied in the business plan. Cost pressures remain elevated, with personnel expenses up 14.6% year over year to €31.1 million, due to higher full-time equivalent, or FTE, count and salary inflation.

The company’s capital structure is below:
 

Tele Columbus and Lazard did not return requests seeking comment.