Digicel bonds rise on prospect of action to tackle debt
Digicel bonds rose last night, after Denis O'Brien's telecoms and communications group told bondholders to expect action in the "near term" aimed at addressing its $6.8bn (€5.8bn) debt burden.
Options on the table are understood to include selling assets and potentially offering to buy back bonds at a discount to face value.
Investors are understood to have been told last night that the sale by the group of 450 telecom towers in Jamaica will raise $90m, more than the initial $80m guidance, and will close in the current financial quarter.
A second sale, of 309 towers in the Pacific, is set to raise an additional $55m, and is on course to close later this year, sources said.
The business, which operates across 32 markets in the Caribbean and the Pacific, told investors on the call that it is reviewing a number of options to cut its debt burden, including so-called liability management exercises.
Any actions will happen at the group's holding company level - at a remove from the operations of Digicel's far-flung telecoms empire.
Liability management exercises are aimed at cutting overall debt or the ongoing burden of servicing debt. That can include what is called a discounted bond buyback, which involves launching an offer to buy bonds that are trading on the market at a discount - typically the company will offer less than the face value of the bonds but a premium to current prices. Bondholders can take or leave the offer.
Other options could involve rolling existing debt into new, easier-to-service structures, which would require lender consent.
A company spokesman declined to comment.
Digicel told investors earlier this year that it plans to reduce its debt burden by "one-turn" - a multiple of borrowings to earnings - to 5.7 times earnings from 6.7 times, by next year, largely through growth.
After a cancelled stock market listing in 2015, proceeds of which would have reduced its debt, the business has been hit by strengthening of the US dollar. Digicel borrows on the markets in US currency but makes its money in a mix of local currencies in the markets where it trades.
An operational restructuring of the business has led to cost reductions but the bonds have traded down sharply since the start of this year.
Last night, however, Digicel bonds due to be repaid in 2020 - the company's next big debt maturity deadline - were among the biggest gainers in the US high-yield market in New York. Its $2bn of bonds due on September 2020 added 4.4 cents on the dollar to 71.25 cents, according to Trace bond trading data.
The same bonds traded around face value in January - but had dipped below 67 cents on the dollar in recent days.