Digital 9 Infrastructure says that its board has elected to not declare its Q2 2023 dividend. Higher interest rates and the inability to raise fresh equity have put pressure on its liquidity.
At 30 June 2023, the Group had about £47m of unrestricted cash available and £18.8m remaining undrawn from its £375m revolving credit facility (RCF), excluding the accordion tranche of up to £125m. As at 27 September 2023, the Group had about £30m of unrestricted cash available with £11.3m remaining on the RCF.
The board and investment manager expect operating cash flow dividend cover to be substantially achieved by 31 December 2024. However, further increases in net interest costs related to the RCF, and the need to fund its growth capital expenditure pipeline reduce actual cash available for distribution. So, too, does the Arqiva Group Vendor Loan Note and the company’s share of the Arqiva Group accretion payment on its inflation-linked swaps (which expire in 2027).
The investment manager believes a more conservative approach to capital allocation is required. The board has therefore elected to not declare the Q2 2023 dividend and is withdrawing its target dividend of 6.0p for the year ending 31 December 2023.
Shareholder consultation
The board will start a formal consultation with its shareholders, starting on 2 October 2023, to determine the optimal future dividend policy and discuss the future direction of the company. This will be led by the chair and the board, in conjunction with the investment manager and the company’s joint corporate brokers, J.P. Morgan Cazenove and Peel Hunt.
Verne syndication
Digital 9 says it has several non-binding offers at, or around the net asset value of Verne Global as at 31 December 2022. The offers include proposals for both a co-controlling and majority stake sale, and funding solutions for the significant capital expenditure commitment for Verne Global’s platform (which is now reckoned to be £610m, up from £493m reported previously).
The cash proceeds (net of costs) from the syndication will enable Digital9 to pay down a significant portion of its RCF and cancel part of it (reducing costs).
Final terms for the syndication are now expected to be announced in Q4 2023.
[Getting this syndication across the line would be transformational for Digital9, addressing its liquidity problems and opening a path to a recovery in the share price.]
In addition, Digital9 says that the launch of EMIC-1 (a 10,000km fibre system from Europe to India) has been delayed by up to 6 months to Q2 2025 due to deployment restrictions in the Red Sea.
DGI9 : Digital 9 will not pay a dividend for Q2 2023