Communications provider TalkTalk has revealed that it is turning to the bond markets for funding, as well as perhaps suffering an increase in the cost of borrowing, by securing £300 million. This should help them to repay some of their bank lenders (the provider owes around £847m in net debt).
The ISP has had a bit of a rough couple of years, not least due to the cost impact of several cyber-attacks’ and the semi-related customer bleed that has been going on for awhile (example). However the situation has recently been improving, with fewer subscribers leaving and customer complaint levels dropping (here).
But no business can afford to stand still and TalkTalk’s last financial report also revealed that they planned to invest £40m over 3 years to expand their capacity and “drive down our long term backhaul costs by £20m p.a.” (here). The ISP also reported total revenue of £902m for H1 2017 (down from £912m in H1 2016).
According to today’s Telegraph, TalkTalk is due to repay some £50m of debt (short term bank facilities) this year and then £460m in 2019, so the new bond should help towards tackling that problem and at the same time diversify their funding sources; even if it could make future borrowing more expensive. This also marks the first time that the ISP has turned to the bond market for help.
ISPreview.co.uk understands that the bond had been in planning for some time and is a tool that a lot of listed companies use. Indeed TalkTalk is one of the only major players in the UK telco space that does not currently have public bonds in issue and meanwhile the credit markets remain broadly favourable. At our last check (1:52pm) shares in TalkTalk were down about -2% on the day at 169.14p and their next trading update is due soon.
It’s worth pointing out that having a big pile of debt is somewhat par for the course in this market, with BT Group sitting on a colossal pile of £9,573m and Virgin Media having plenty of its own (here). Mind you they both have a huge amount of their own infrastructure.