There is one achievement for which National Broadband Ireland (NBI) is ahead of schedule. The company tasked with rolling out nationwide rural broadband has just announced the replacement of its largest investors with a new backer, Asterion Industrial Partners.

In February of this year, NBI chief executive Peter Hendrick had told The Currency that the search for new investors was under way: “I would expect it to be sometime before the end of this year, I’d say Q3, Q4.” The deal is now on the table, subject to approval by the Minister for Communications Eamon Ryan.

Hendrick’s comment came on the back of The Currency’s revelation at the end of last year that Granahan McCourt, NBI chairman David McCourt’s firm, and its closest partner Tetrad Corporation were looking for stable equity investors to roll out the project, in place of the short-term credit investment funds hastily brought in to get the National Broadband Plan contract over the line in 2019.

McCourt and Tetrad appointed global investment bank PJT to sell those stakes. At the time, Hendrick confirmed that US investment firm Oak Hill Advisors was looking to exit its 49 per cent investment in NBI. The 25 per cent contributed by Twin Point Capital, another US finance house founded by former Oak Hill executives, were in the balance.

Now both fund managers have agreed to sell out to Spanish infrastructure investment firm Asterion, according to NBI’s announcement. The new investor is also due to acquire other “certain minorities,” which covers smaller stakes held until now by telecoms businessmen Bruno Ducharme of Canada and Brian Thompson in the US. Altogether, The Currency understands that the deal is for Asterion to acquire 80 per cent of NBI’s ultimate shareholding.

Management stakes including Hendrick’s are not transferring to Asterion. If approved, the deal will result in “Asterion and Granahan McCourt taking on all responsibilities and guarantees in accordance with the Project Agreement” – the state contract to roll out fibre to more than half a million rural premises in exchange for a maximum subsidy of €2.97 billion including Vat and contingencies.

The joint responsibility statement implies an overhaul of the complex tiered holding structure erected at the start of the project. Until now, investment by each of Oak Hill and Twin Point came through a minority stake in successive Russian doll-like companies. This allowed McCourt to retain a majority of voting rights and ultimate contractual responsibility in the overall structure, even though he ultimately provided at most 10 per cent of the company’s financial backing. 

The two US fund managers, meanwhile, were tied into the National Broadband Plan contract via unsecured loans they extended to NBI at a 12 per cent interest rate – including an obligation to contribute the majority of €220 million committed by the company’s investors during the project’s roll-out – but they did not have formal control over the business. 

Ripe for mature investment

It will be interesting to see what level of control and return Asterion expects from its investment in NBI. The Madrid-based firm is, like Oak Hill and Twin Point, an investment manager, but its funds specialise in long-term telecommunications and utility assets rather than high-risk debt.

The new shareholder’s lower-risk, longer-term outlook should allow the Irish broadband company to access less expensive finance. NBI now reports it is on track to exceed a reduced post-Covid target of 102,000 addressed “passed” by fibre ready for connection before the end of next January. The more stable, less frantic company is ripe for takeover by more mature investors.

Asterion was established in 2018, along with its first fund, Asterion Industrial Infra Fund I, which raised over €1 billion. Its experience includes similar investments to NBI in fibre networks operators Retelit in Italy (around €108 million as of last year) and Cableworld in Spain (€56 million). It reported a €3 million increase in the valuation of its Cableworld investment in its first year. Asterion has launched three new funds since the start of 2021.

NBI was not yet ready to detail the format and structure of Asterion’s investment when contacted by The Currency on Tuesday evening – nor its value, which understandably remains confidential until ministerial approval ensures the company doesn’t need to go back to any underbidders.

NBI’s exiting investors have advanced 80 per cent of the €120 million the company has drawn down from its shareholders to date. Nearly all of this (98 per cent) was in the form of loans attracting a 12 per cent compound interest rate. On paper, they have now accrued interest worth around €27 million from the €96 million they invested between late 2019 and late 2021.

The corresponding €123 million total formed the basis of negotiations with Asterion, but we don’t know yet what price they finally agreed. In addition, the new Spanish majority shareholder in NBI will have to provide most of the remaining €103 million in committed private sector funding for the project.