Digital 9 Infrastructure to divest EMIC-1 for $42m amid wind-down strategy

Digital 9 Infrastructure PLC (DGI9) has announced the divestment of its interest in EMIC-1 for $42 million (£33 million), a significant step in its strategic wind-down plan aimed at maximising shareholder value. The transaction, expected to conclude by March 2025, underscores the company’s commitment to addressing financial challenges while navigating a complex investment landscape.

EMIC-1 Sale Reflects Strategic Priorities Amid Regional Challenges

The $42 million sale price for EMIC-1 represents a 15% discount to its June 2024 valuation of $49.6 million. This valuation adjustment is attributed to ongoing conflicts in the Red Sea region, which have indefinitely delayed the project’s final construction phase.

While the discount has implications for shareholder returns, the deal eliminates approximately $10 million in additional construction commitments tied to the project. This reduction in liabilities signals a cautious but strategic approach by Digital 9 Infrastructure in mitigating risks associated with high-stakes investments.

Reallocation of Proceeds to Reduce Debt

The proceeds from the EMIC-1 divestment will be directed towards reducing DGI9’s Revolving Credit Facility (RCF), which currently stands at £53 million. The company is in advanced discussions with lenders to extend the maturity of the RCF beyond its current deadline of 31 March 2025.

The divestment’s financial benefits align with DGI9’s broader objective of deleveraging its balance sheet. Chairman Eric Sanderson highlighted this, noting that the transaction not only strengthens the company’s financial position but also advances its managed wind-down strategy.

Subsea Cable Asset Sales Gain Momentum

The EMIC-1 divestment is part of a larger initiative to sell the company’s subsea cable assets, including AquaComms, a key asset in its digital infrastructure portfolio. Advanced discussions regarding the sale of AquaComms are already underway, with updates expected in early 2025.

Transaction costs for the EMIC-1 sale, amounting to $2.6 million, primarily relate to fees tied to the broader subsea cable divestment strategy initiated in early 2024. Despite these costs, the company remains optimistic about achieving favourable outcomes for these high-value assets.

Portfolio Valuation and Shareholder Engagement

As part of its wind-down plan, Digital 9 Infrastructure has commenced the valuation of its wider investment portfolio, with results anticipated for the fiscal year ending 31 December 2024. This review will provide clarity on asset performance and support decision-making for further divestments.

The company plans to engage shareholders through a roadshow in early 2025, allowing for transparency and collaborative discussions on its progress and next steps. InfraRed Capital Partners, the investment manager, is actively working alongside the Board to ensure the portfolio’s orderly realisation.

Balancing Shareholder Value with Market Realities

Eric Sanderson emphasised that the EMIC-1 sale represents a crucial milestone in the company’s journey. He noted that despite the challenging market environment, the Board is committed to balancing asset value maximisation with timely capital returns to shareholders.

The wind-down process is designed to deliver long-term value through strategic asset sales, disciplined financial management, and stakeholder engagement. Digital 9 Infrastructure, listed on the London Stock Exchange and a constituent of the FTSE All-Share Index, continues to prioritise shareholder interests as it navigates its final phase.

Expert Insights: The Importance of Timing in Divestments

Industry experts highlight that the timing of asset sales is critical for infrastructure investment trusts like DGI9. While market conditions can influence valuations, aligning transactions with strategic objectives—such as deleveraging or mitigating risks—ensures sustainable outcomes.

The EMIC-1 divestment underscores this approach, as it reflects DGI9’s focus on maintaining financial flexibility while advancing its wind-down strategy.