Banks are preparing for significant losses of up to £2 billion linked to their investments in CityFibre amid a substantial restructuring of the broadband provider’s debt. The company, regarded as a major challenger to BT in the UK’s full-fibre broadband market, is expected to seek concessions from its lenders, which include NatWest, Lloyds, and Société Générale.

CityFibre has reportedly proposed a refinancing plan that would see some of its nearly £4 billion debt converted into equity, alongside a reduction in the value of existing loans. Industry sources indicate that the precise terms are still being negotiated, with some lenders anticipated to face larger write-downs than others. The restructuring efforts come as the firm works to manage rising interest costs on its significant debt burden.

Despite the anticipated losses for banking institutions, the restructuring appears designed to shield government-backed investments. The Treasury’s National Wealth Fund, which has invested around £300 million of public funds into CityFibre, is expected to remain unaffected by the refinancing arrangement.

The move follows a commitment from major shareholders—including investment bank Goldman Sachs and the Abu Dhabi sovereign wealth fund Mubadala—to provide an additional £900 million in equity to support CityFibre’s operations. Analysts note that shareholders are likely requiring debt holders to accept some level of financial pain as a condition for this capital injection, even if the losses do not formally take the shape of debt write-downs.

Karen Egan of Enders Analysis commented that equity investors “will be asking for some pain on the debt side of the equation in return for the £900 million of equity injection,” underscoring the complex negotiations balancing debt reduction with new funding.

CityFibre, as the largest alternative network builder deploying full-fibre infrastructure beyond BT, has positioned itself to compete aggressively in the broadband sector but faces significant financial pressures amid a challenging economic environment. A company spokesperson emphasized confidence in CityFibre’s business model and its ability to navigate upcoming challenges, stating that the company’s performance “demonstrates [the] strength of CityFibre’s business and we are well-positioned to meet any challenges ahead.”