Digital 9 Infrastructure Announces Subsea Cable Investment Sale
Digital 9 Infrastructure (DGI9) has revealed that it has finalized a binding agreement to divest its interests in the subsea cable investment project, EMIC-1. The transaction is anticipated to be completed by March 2025.
The sale is valued at $42 million, which accounts for a deduction of $2.6 million in transaction fees. This consideration reflects a 15% discount (around 0.7p per share) compared to the most recent valuation of $49.6 million as of June 30, 2024. The ongoing conflicts in the Red Sea region have caused indefinite delays in the project’s full construction, but the deal also alleviates the company from an additional $10 million in construction commitments.
Most of the transaction costs stem from significant fees that were agreed upon at the start of the sales process in early 2024, concerning the divestment of the company’s subsea cable assets. These fees will only be payable after the completion of AquaComms’ sale.
The net proceeds from this transaction will empower DGI9 to further strengthen its balance sheet by reducing its revolving credit facility (RCF) balance of £53 million. The company is currently in discussions with RCF lenders to extend the remaining balance beyond the current maturity date of March 31, 2025. Furthermore, the remaining RCF balance is anticipated to be settled through proceeds from other ongoing sales initiatives.
DGI9 is also engaged in advanced negotiations concerning the sale of the remaining subsea cable business, AquaComms, and expects to provide updates on this progress in the near future. The valuation process for the broader investment portfolio for the fiscal year ending December 31, 2024 has commenced.
Eric Sanderson, chair of Digital 9 Infrastructure plc, stated: “The sale of EMIC-1 marks a significant milestone in the company’s progress towards winding down operations and improving our balance sheet on behalf of our shareholders. We aim to achieve what the board considers to be a satisfactory value outcome in a challenging environment. We remain committed to taking every possible step to increase shareholder value over time, aiming for a balance between maximizing asset value and providing timely returns to our shareholders.”
Commentary: “This outcome is a welcome year-end positive for DGI9, providing a much-needed boost. Yet, it’s somewhat disappointing that the asset was sold at a 15% discount relative to NAV, particularly following the significant NAV reduction earlier this year. Shareholders may hope subsequent asset sales will yield better valuations, especially given the asset’s location in a conflicted area, suggesting this sale may have been expedited to demonstrate activity throughout 2024. The swift completion of the inaugural transaction by InfraRed, having just taken over management in December, is also promising. However, it is noteworthy that the trust has not yet raised sufficient funds to fully pay off its revolving credit facility, indicating there may be additional NAV reductions in the future as InfraRed investigates the portfolio further.”
DGI9: Digital 9 Infrastructure concludes subsea cable investment sale
