TalkTalk Telecom Group reached a tentative agreement with lenders on a refinancing that will give the cash-strapped UK broadband provider more time to pay its debts, as it struggles with competition and higher costs.

Shareholders will provide an immediate £65 million (US$83 million, or RM369.76 million) of funding, with a further £170 million to come once binding agreements have been signed, according to a company statement on Monday. Major shareholders and Ares Management Corp will also contribute further assets to the company, including the Virtual1 business, and the Ovo and Shell-branded customer bases.

In exchange, a group of holders of the £685 million of bonds, as well as lenders under its revolving credit facility have agreed to extend the maturities of their debt to September 2027. The noteholder and credit facility lender groups together hold about 60% of the company’s secured debt, according to the statement.

TalkTalk’s bond was set for a record gain after the announcement, with notes quoted as much as 10.6 pence on the pound higher at 76.8 pence, according to data compiled by Bloomberg. Sky News reported details of the refinancing deal earlier.

TalkTalk, struggling under the debt load after its 2021 leveraged buyout by Toscafund Asset Management LLP and private equity firm Penta Capital, has faced a shrinking consumer base and a shift from copper to fiber optics, as well as increasing inflationary pressures, such as from rising wages.

The low-cost service provider has been in negotiations for a new investment into its wholesale business, which would have paved the way for a debt refinancing. However, discussions have dragged on without a clear resolution, prompting ratings firms to downgrade the company.

As part of the overhaul, Chief Financial Officer James Smith will become chief executive officer Sept. 1, according to the statement. Founder Charles Dunstone will continue in his role as group chairman.

TalkTalk’s £330 million revolving credit facility is due in November, while the senior secured bonds mature in February, the according to data compiled by Bloomberg. Ares also extended a £440 million payment-in-kind facility to a parent entity of TalkTalk due in June 2026.

  - Bloomberg