Digital infrastructure investment firm D9 has sold its interest in a fiber pair of the 2Africa Pearls subsea cable project. This move comes as part of the company’s ongoing wind-down strategy and divestment of digital infrastructure assets. The deal, expected to close by March 2025, sees D9 divesting its stake in the Europe Middle-East India Connect 1 (EMIC-1) system, which was previously tied to the 2Africa Pearls extension.
Why Did D9 Divest Its Interest in EMIC-1?
D9’s decision to sell its share in the EMIC-1 system stems from a range of factors. The subsea cable project has been significantly delayed, primarily due to ongoing conflicts in the Red Sea region. These geopolitical issues have impacted the final construction timeline, leading to an indefinite delay for the cable’s completion. As a result, D9 opted to divest, securing a $42 million deal, which represents a 15% discount compared to the project’s valuation in June 2024.
By selling its interest, D9 also alleviates itself from $10 million in additional construction commitments. The divestment allows the company to focus on its broader wind-down process while addressing its financial obligations.
What Is the Impact of This Sale on D9’s Strategy?
The sale of EMIC-1 is a significant milestone in D9’s strategic shift. Originally, D9 had acquired a fiber pair on the 2Africa Pearls extension, intending to market it as EMIC-1. However, due to the project delays and strategic re-evaluation, the company decided to exit the deal. This sale is part of D9’s broader plan to de-leverage its balance sheet and reduce exposure to underperforming assets.
D9’s move also highlights the challenges digital infrastructure companies face when dealing with large, global projects, particularly in regions affected by geopolitical instability. The Red Sea conflict, which has stalled progress on the 2Africa Pearls cable, is a reminder of how unpredictable international infrastructure development can be.
Financial Aspects of the Transaction
D9’s divestment of EMIC-1 involves a transaction valued at $42 million, significantly lower than its initial valuation. The 15% discount reflects the risks and delays associated with the project. According to D9’s announcement, the sale of the EMIC-1 interest will help the company reduce its liabilities by freeing it from $10 million in construction commitments.
The net proceeds from the sale will go toward reducing D9’s Revolving Credit Facility (RCF) balance, which currently stands at £53 million ($65 million). The company is in talks with RCF lenders to extend the remaining balance of the facility, which is due for repayment by March 2025.
D9’s Wind-Down and Broader Strategy
D9, which has only been in operation for four years, is in the process of winding down its business. After raising £300 million ($365 million) through an IPO in March 2021, the firm set out to acquire various digital infrastructure firms. However, in early 2024, D9 decided to exit its operations after a strategic review.
In addition to the sale of EMIC-1, D9 has offloaded several other assets in recent months. Notably, in October 2024, the company appointed InfraRed Capital Partners to manage its assets during the wind-down. This followed the sale of Verne, a European data center firm, to Ardian. In January 2025, Aqua Comms was sold to Exa Infrastructure, signaling further steps toward completing its asset liquidation process.
Industry Implications of D9’s Exit from 2Africa Pearls
D9’s exit from the 2Africa Pearls project underscores the challenges in the digital infrastructure space, particularly for investors dealing with international projects that rely on stable geopolitical environments. The 2Africa Pearls cable, which aims to extend the 2Africa subsea cable project, has faced significant delays due to the volatile region of the Red Sea. As the cable network remains a critical part of global communications, these delays could have far-reaching implications for companies relying on its completion.
FAQ
Q: What is the 2Africa Pearls subsea cable project?
A: The 2Africa Pearls project is an extension of the 2Africa subsea cable, which is a large-scale fiber optic network designed to improve connectivity across Africa, the Middle East, and parts of Europe and Asia. The Pearls extension aims to provide additional capacity for the growing demand for data traffic in these regions.
Q: Why was the 2Africa Pearls project delayed?
A: The project has been delayed due to ongoing conflicts in the Red Sea area, particularly near the coast of Yemen, which have affected the construction timeline.
Q: How will D9’s sale affect its financial health?
A: The sale will help D9 reduce its liabilities and de-leverage its balance sheet, contributing to the company’s financial restructuring efforts during its wind-down process.
