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Digital 9 Infrastructure sells subsea cable investment

Digital 9 Infrastructure (DGI9) has announced that it has entered into a binding agreement for the divestment of its interests in subsea cable investment EMIC-1, with completion expected by March 2025.

The $42m consideration, which is net of $2.6m of transaction costs, represents a 15% discount (approximately 0.7p per share) to the latest valuation of $49.6m as at 30 June 2024. The project continues to be impacted by ongoing conflicts in the Red Sea area, which have led to an indefinite delay to its final construction completion. The transaction also releases the group from $10m of additional construction commitments.

Transaction costs are predominantly an allocation of substantial fees payable on the completion of the divestment of the company’s Subsea cable assets, which were committed to at the commencement of the sales process in early 2024. These fees will become payable following the completion of a sale of AquaComms.

The net proceeds will allow the company to further deleverage its balance sheet by reducing its RCF balance of £53m. The company is discussing options with the RCF lenders, to extend the remaining balance of the RCF beyond the current maturity date of 31 March 2025.  The remaining balance of the RCF is expected to be repaid through proceeds from other live sale initiatives that are progressing in parallel.

The company is also in advanced discussions on the sale of the remainder of the subsea cable business, AquaComms, and expects to report on further progress in due course. The valuation process has commenced in respect of the wider investment portfolio for the year ending 31 December 2024. 

Eric Sanderson, chairman of Digital 9 Infrastructure plc, commented: “The sale of EMIC-1 represents a key milestone for progressing the wind-down of the company and deleveraging the balance sheet, on behalf of shareholders, achieving what the board believes is an acceptable value outcome in a challenging environment. We remain focused on taking every action possible to realise shareholder value over time, seeking to achieve a balance between maximizing the value from our assets and making timely capital returns to shareholders.”

QD comment: [“This is welcome zero-hour present for DGI9, ending a storied year on a much needed positive note. However, it has to be said that the 15% discount to NAV that this asset was sold on is slightly disappointing, given the already large NAV haircut that the trust had earlier this year. 

Shareholders may hope that future asset sales will be at better valuations, given that the asset was located in a troubled area (and the sale may have been rushed to ensure some activity was reported over 2024). The pace at which InfraRed has completed its first transaction is also encouraging, having only taken over management in December. However, we note that the trust still hasn’t raised enough to pay off its revolving credit facility and it may be that there is a further NAV reduction to come as InfraRed gets to delve deeper into the portfolio.”]

DGI9 : Digital 9 Infrastructure sells subsea cable investment

Written By Andrew Courtney

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