CityFibre Sign GBP4.9bn Debt Raise to Boost UK Full Fibre Rollout

CityFibre has announced “one of Europe’s largest ever Full Fibre financings” by completing a debt raise worth a staggering £4.9bn. The deal enables them to complete their plan to cover 8 million UK premises with gigaibt-capable FTTP broadband and to bid on contract’s under the Government’s £5bn Project Gigabit scheme for rural areas.

The operator – supported by investment from the West Street Infrastructure Fund (Goldman Sachs), Antin Infrastructure Fund, Interogo Holdings and Mubadala – has been building Dark Fibre style networks to serve businesses and the public sector for many years. But all of that started to change in 2018 when they embarked on a major network expansion to reach millions of homes and smaller businesses via Fibre-to-the-Premises (FTTP) technology.

The operator is now deep into the rollout phase of their network build, which aims to have 8 million premises “substantially completed” – across over 285 cities, towns and villages (c.30% of the UK) – by the end of 2025 (here). The new network is also expected, once complete, to cover 800,000 businesses, 400,000 public sector sites and 250,000 5G access points.

As part of that effort, they today claim to have covered 1.7 million UK premises – with 1.5m ‘Ready For Service‘ via a supporting ISP – this is up strongly from 1.5m (1.3m RFS) in March 2022 (here). The forecast cost of completing their target was previously pegged at £4bn, but CityFibre has long been working to secure further investment so that they can build into more than just urban towns and second tier cities.

One key focus has been the company’s desire to bid on contracts under the Government’s £5bn Project Gigabit programme (i.e. those nearby to their existing builds), which is an area they’ve already trialled (here). In theory, successful contract wins under Project Gigabit could see their future coverage expand beyond the current target, and possibly reach up to 9+ million premises. But even if they don’t win any, the added competitive pressure will help by nudging rivals (e.g. Openreach, Virgin Media etc.) to build further and faster.

The New Funding

The newly agreed £4.9bn debt package comprises committed facilities of £3.9bn and an accordion facility (i.e. an option that they can buy to further increase their line of credit) of £1bn. The new debt raise is being underwritten by NatWest, Société Générale, Crédit Agricole CIB, BBVA, Intesa Sanpaolo, ING and SEB; with ABN AMRO, Lloyds Bank and the pensions and M&G Investments, the international asset manager, joining as core lenders.

Also participating as a core lender is the recently established UK Infrastructure Bank (UKIB). On behalf of CityFibre, NatWest and Société Générale acted as financial advisors, Lloyds coordinated the UKIB’s involvement, and Latham & Watkins acted as legal advisor.

Greg Mesch, CEO of CityFibre, said:

“Over the last decade we’ve built a business that has transformed the UK’s digital connectivity landscape for the better. With our rollout now fully financed, backed by so many esteemed financial institutions, we have emerged as a strong national challenger.

But CityFibre’s aim is not simply to challenge. It’s to be better. It’s to establish ourselves as the preferred network wherever we build, bringing higher-quality, more affordable infrastructure within reach of millions and unleashing the transformative economic potential of Full Fibre to help level up the UK. We have never been more confident that we will succeed.”

John Flint, CEO of the UK Infrastructure Bank, said:

“We are pleased to act as a cornerstone investor in what will be the largest digital debt transaction in the UK market to date, connecting a third of UK households with fast and reliable broadband throughout England and Scotland.

It is clear how important good quality connectivity is for the UK economy, and in addressing regional inequalities.”

The financing follows £1.125bn in equity investments that CityFibre has closed in the last ten months from two new investors, Mubadala and Interogo Holding, as well as from its two existing investors – Antin Infrastructure Partners and the Infrastructure business within Goldman Sachs Asset Management.

The operator states that a voluntary post installation survey of the reasons end-users switched to their new ISP – conducted with 5500 respondents – has shown that the largest single driver (42%) was a desire to be on CityFibre’s network (related ISPs often offer cheaper and faster tiers than the established players).

Our apologies if this story is only going online the day after it was announced, but it was awkwardly announced on a bank holiday and family tends to come first.