Banks with exposure to heavily indebted European broadband providers are selling loans to distressed debt funds at a discount, signaling growing frustration with the cash-strapped sector.
London-based FitzWalter Capital recently purchased around half the bank debt of Germany’s DNS:Net as reported by Bloomberg in May, after owner 3i Infrastructure (LON: 3IN) ruled out injecting further funds into the struggling provider.
3i Infrastructure wrote down its stake in DNS:Net to zero after the firm’s plan for rolling out cable for fiber-optic broadband faltered, leaving lenders with little choice but to seek an exit.
FitzWalter also took over UK firm G.Network through an administration process after buying positions in the group’s debt and equity, underscoring the fund’s aggressive move into distressed European broadband assets.
One bank with exposure to Deutsche Glasfaser, a major German altnet, sold roughly 350 million euros ($404 million) of loans to Victor Khosla’s Strategic Value Partners during a 7 billion euro debt restructuring.
The entry of distressed debt funds into what is typically bank-dominated infrastructure financing highlights the lengths some lenders are prepared to go to cut exposure to the troubled industry.
About 65% of European fiber companies need to refinance within the next two years, according to a survey by AlixPartners, raising the prospect of further painful restructurings across the sector.
European altnet firms attracted around 85 billion euros in debt financing alone between 2021 and 2024, according to figures from industry body FTTH Council Europe, fueling an aggressive but ultimately unsustainable expansion.
Private equity sponsors including EQT AB and Goldman Sachs Asset Management, alongside banks from NatWest Group to Societe Generale (EPA: GLE), once viewed the sector as a near-certain bet given government backing for connectivity improvements and post-pandemic homeworking trends.
“There was a focus on land grabbing — building as much fiber as you could so that you would be there sooner than your competitor,” said Jeroen Kleinjan, global lead for telecom at ING Groep, noting that customer sign-ups failed to keep pace with spending.
“There wasn’t sufficient focus on actually connecting subscribers to the network,” Kleinjan added, capturing the fundamental flaw in the altnet expansion model that has since come back to haunt investors and lenders alike.
“There’s an injection of reality that has now landed quite heavily into the market,” said Stuart Cockburn, a partner at AlixPartners in London, describing the sector’s sharp reversal of fortunes.
Deutsche Glasfaser’s debt overhaul, agreed in April, saw sponsors provide 845 million euros in preferred equity, but only in exchange for lenders agreeing to subordinate 1.7 billion euros of debt and providing 400 million euros in new financing.
In some cases, lenders have been forced to take over companies outright, with a consortium including the UK’s state-backed National Wealth Fund, ABN Amro, and NatWest taking control of rural fiber provider Gigaclear earlier this year.
“It’s like a gate that is closing,” said Susanne Küppers, chief financial officer of German fiber operator GVG Glasfaser, describing lender reluctance following a prolonged refinancing process for her own company.
UK-based CityFibre may need to raise around 1 billion pounds to fund growth plans after renegotiating its debt last year, having already secured 2.3 billion pounds from lenders including Lloyds Banking Group and SocGen.
Liberty Global (NASDAQ: LBTYA) backed Nexfibre agreed this year to acquire Netomnia in a 2 billion pound deal, with shareholders injecting 1 billion pounds of funding to support the transaction, reflecting ongoing consolidation pressure.
Germany’s Unsere Grüne Glasfaser, a Telefonica-Allianz joint venture, acquired rival Infrafibre for just 1 euro in 2024, but the integration of two fiber networks and a retail business continues to present significant operational challenges.
The company is engaging with lenders on a refinancing currently ongoing “without any immediate pressure” from debt covenants or funding arrangements, according to a company spokesperson, though the outcome remains closely watched by the market.
With refinancing walls looming and lender appetite thin, the European broadband sector faces a prolonged period of restructuring, consolidation, and continued scrutiny from investors burned by the sector’s failed land-grab strategy.
