TalkTalk UK Shareholders Propose £400m Package to Entice Lenders

The efforts to try and save broadband ISP TalkTalk from its rapidly suffocating debts took another twist today after a report claimed that shareholders, led by company founder Sir Charles Dunstone, are attempting to sweeten their offer to lenders by introducing an asset pledge – worth c.£200m – to support an already proposed capital injection of over £200m.

Just to recap. The TalkTalk Group has already spent much of the past few years wrestling with its existing c.£1bn debt pile, which in 2023 culminated in a plan to demerge the group into three separate businesses (TalkTalk Consumer, TalkTalk Business Direct and the wholesale centric PlatformX Communications – here), while also cutting costs (e.g. marketing) and monetising some assets (e.g. selling IP addresses).

The demerger could also, in theory, make it easier to sell off individual parts of the business (selling the entire group has proven tricky) and the first piece to go was technically TT Business Direct, which ended up being sold to the company’s own shareholders for £95m after struggling to attract much interest (here). But so far there have been no further deals and key debt deadlines are fast approaching.

However, a report last weekend (here) indicated that the group’s existing backers – Sir Charles Dunstone, Toscafund and Ares Management – would meet this week to discuss an injection of over £200m to help keep the business rolling (this side of things has already been confirmed). The same report also noted that separate discussions with Australian banking giant Macquarie about a larger investment into PlatformX were also ongoing.

Suffice to say that the week is now drawing to a close and an official agreement on putting new capital investment into the business has yet to be announced, which could suggest that existing lenders might need some additional encouragement to get them over the line.

According to a new report on Sky News today, Sir Charles has moved to sweeten the aforementioned £200m capital injection by complementing it with an asset package worth roughly the same value (total of c.£400m). Some of the assets that are alleged to be part of this package include wholesaler Virtual1 and the broadband customer base that was recently acquired from Shell Energy via Octopus Energy (here).

In theory and assuming bank lenders and bondholders agree to support the package, such a deal would extend the company’s repayment obligations until 2027 – buying it some much-needed time. Recent reports have suggested that the provider could be at risk of collapse, perhaps even as soon as next month, if they are unable to secure an agreement. Put another way, it won’t be long before we discover the outcome, for better or worse.