TalkTalk has avoided collapse after securing an emergency lifeline from its billionaire founder.
Sir Charles Dunstone and other shareholders have agreed to inject £65m into the struggling broadband business immediately to avoid a looming debt default.
The initial investment will be followed by a further £170m, while assets including the Virtual1 subsidiary and Ovo and Shell internet brands will also be rolled into the group to strengthen its finances.
Shareholders Toscafund and Ares Management also took part in the refinancing, which is worth more than £400m in total.
In return, lenders and bondholders have agreed to extend existing debt deadlines in November 2024 and February 2025 until September 2027.
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.”
The bailout offers a crucial reprieve to the business, which last month warned it could collapse within weeks as it struggles under a £1bn debt pile.
Sell-off fell through
The company – which has 3.6m UK customers – had been in talks about selling a stake worth up to £500m in PlatformX, its wholesale division, to Australian investor Macquarie, but discussions broke down and Sir Charles is instead pumping his own money into the business.
TalkTalk previously sold its business division to a group of existing shareholders for £95m and is also exploring a potential sale of its consumer arm as part of a wider break-up.
The company’s debt troubles have been compounded by lacklustre trading as the broadband provider grapples with surging inflation and tough competition.
It lost 334,000 customers last year and pre-tax losses ballooned from £70m to £127m.
TalkTalk’s financial difficulties have come under close scrutiny from regulator Ofcom, which has begun drawing up plans for a “supplier of last resort” regime.
Larger rivals including Virgin Media O2, which held early-stage talks with TalkTalk earlier this year, have also been monitoring the situation.
It threatens to mark a rare setback for Sir Charles, a serial entrepreneur who also founded Carphone Warehouse. He took TalkTalk private three years ago in a £1.1bn debt-fuelled deal.
In addition to the refinancing, TalkTalk also confirmed that Dame Tristia Harrison will step down as chief executive next month. She will be replaced by James Smith, the current finance chief. Sir Charles will continue in his role as chairman.