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CityFibre is closing in on a crucial £2.3bn refinancing designed to keep the UK’s third-biggest broadband network afloat.
The alternative network provider, or “altnet”, was in final talks on Friday about a deal that will see shareholders including Goldman Sachs and Abu Dhabi’s sovereign investor Mubadala inject a further £500mn of equity into the company, according to people familiar with the matter.
The group was also set to secure a further £960mn in debt from lenders including NatWest, ING and Société Générale, with the possibility of an additional £800mn in a so-called “accordion” facility, the people said. They added that the financing was set to be finalised on Friday or Monday.
The telecoms group, which was founded in 2011, has been racing to secure the extra funding since late last year, having warned in its 2023 results that it would run out of cash by mid-2025.
At the time CityFibre said there was a “material uncertainty” over its ability to continue without further external financing.
It is expected to use its stronger balance sheet to help consolidate weaker players within the altnet sector, with chief executive Greg Mesch claiming at a recent conference that the company had four deals ready to sign upon the refinancing’s completion.
The impending funding deal comes at a tougher time for the group of small companies hoping to challenge BT’s Openreach and Virgin Media O2, which have been squeezed by higher interest rates and increased competition. Cumulative losses in the altnet sector hit £1.3bn in 2023, according to consultancy Enders.
CityFibre is aiming to double its customer numbers by the end of the year, relying in large part on a landmark agreement signed with Sky last year as well as acquiring smaller companies in the market.
The Sky partnership, which also came into effect this week, gives the telecoms group the option of using CityFibre’s network for its 5.7mn broadband customers, enabling the altnet to broaden its subscriber base. Although CityFibre’s network has the potential to provide services to more than 4.3mn homes, it currently only has 518,000 customers.
In April, Sky met CityFibre’s lenders to reiterate its commitment to providing broadband services on the altnet’s network, as lenders including NatWest and ING sought reassurance before signing off on the refinancing deal.
CityFibre declined to comment.
