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Digicel delays interest on bond debt

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Denis O’Brien . Photo: Simon Dawson/Bloomberg

Denis O’Brien . Photo: Simon Dawson/Bloomberg

Bloomberg

Denis O’Brien . Photo: Simon Dawson/Bloomberg

Denis O'Brien's Digicel has said it will not make some interest payments due on March 30 and April 1, taking advantage of a 30-day grace period permitted under the terms of its bond debt.

The company said the decision had been made arising from “ongoing constructive and consensual discussions with some of its largest debtholders”.

Late last week Digicel said it was talks with bondholders aimed at cutting some of its around $6.8bn of debt.

The debt talks are aimed convincing bondholders to agree to cut the debt they are owned.  If lenders agree a smaller amount of new debt will be issued and swapped for the outstanding bonds.

Its the second time in two years the telecoms group has had to negotiate with its lenders. Digicel spent much of the second half of 2018 in talks that eventually saw bondholders owed $3bn agree to swap their paper for debt falling due much later.

On Monday night, the company said it will defer making interest payments due on March 30 and April 1 on specific bonds due to mature in 2022 and 2024.

Digicel said it continues to engage in constructive discussions with certain debtholders regarding potential transactions involving exchanges of existing debt "aimed at reducing Digicel's leverage, extending its debt maturities and continuing monetization of its well invested network".

Digicel's next big debt repayment is $1.3bn falling due in April 2021, which commands a 6pc interest rate, part of a complicated capital structure featuring bonds with a mix of maturity dates, interest rates and greater and lesser ranking in terms of assets bonds are secured against.

Digicel operates in 32 markets from Jamaica to Papua New Guinea. Quarterly results in February show it had net leverage of about 6.8 times earnings and net debt of $6.8bn.

Digicel has long targeted debt reduction, but its hopes of cutting leverage through growth or by paying down significant sums with the proceeds of disposals have failed to materialise.

A deal to exchange old bonds for new could be executed through a scheme of arrangement - depending on the level of acceptance. It is understood talks may be focused on a deal to exchange old bonds for new debt issued at a discount to the face value owed but at premium to the level where bonds now trade.

Online Editors