Gigabit city fibre networks operator CityFibre Infrastructure (CITY:AIM) is looking secure new financing arrangements to arm itself for the next leg of its ambitious growth plans. The company wants to renegotiate around £100m of debt because of onerous interest charges, believed to be close to 10% per year. It has access to an extra £80m of funding.

CityFibre has 42 city networks nationwide backed by long-term anchor tenants that provide the funding for the initial network build. Anchor tenants are typically local authorities or internet service providers.

A new deal could replace existing facilities on improved terms but also provide the firepower to meet a more rapid national scale-up of its network. Management are hopeful that such a deal could come from one or more of the big UK mobile operators. O2 and Three are thought to be very keen to add fibre muscle to bolster multi-play offers to customers, where a single supplier provides landline, mobile, digital TV and other services. Vodafone (VOD) may also be interested once it has fully untangled its Cable & Wireless network assets.

Equity financing to fuel growth is currently ruled out because of the disappointing share price performance. The stock is currently changing hands for 51p, a 15% discount to its 60p IPO price in January 2014. (SF)

Avoiding heavy dilution of existing shareholders is the right move and we continue to like the long-term investment story. (SF)

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