Tuesday 16 July 2019

Digicel wins 95pc backing for bond deal

Deal: Vast majority backs bond swap proposal from the firm, owned by Denis O’Brien
Deal: Vast majority backs bond swap proposal from the firm, owned by Denis O’Brien
Donal O'Donovan

Donal O'Donovan

Digicel secured overwhelming bondholder acceptance for its offer to swap almost $2bn (€1.75bn) of bonds originally due to mature in 2020 for new bonds maturing in 2022.

Following months of negotiations the exchange offer was backed by holders of 94.7pc of the 2020 debt at the acceptance deadline of midnight in New York on December 18.

Digicel's total debts are around $6.8bn.

Bondholders were won over after the company sweetened the terms on offer - including making $580m of the new structure better-ranked senior secured bonds, ring-fencing a share of future asset sales to pay off debt and inserting stronger terms including delaying shareholder dividends until after the new bonds mature, as well as restrictions around new borrowing by Digicel.

The acceptance deadline has now been extended for the small number of remaining bondholders. Their terms will worsen if they don't roll into the new structure, because the exchange offer secured majority support.

Holders of a second class of bonds due in 2022 have until December 21 to accept a similar exchange offer. Talks between Digicel advisor Citi and representatives of those lenders are understood to be still under way.

Taken together the plan is for the Denis O'Brien-owned telecommunications group to bondholders to swap a total of $3bn (€2.59bn) of outstanding debt for new securities with later maturity dates.

Pushing back bond maturities provides financial breathing space and allows the far-flung telecoms company more time to grow revenues before it needs to repay the debt. Under the swap offer, bonds with an 8.25pc interest rate due in 2020 will be swapped for new bonds due in 2022, also with an 8.25pc interest rate. Another class of bonds, due in 2022 and with a 7.125pc interest rate, would be swapped for new bonds due in 2024, with an 8.25pc interest rate.

Cash interest on the new bond would be 7.125pc and payment-in-kind interest (interest rolled up as new debt) would be 1.125pc.

After a cancelled stock market listing in 2015, which would have reduced its debt, Digicel was 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 32 markets where it trades.

As well as the bond exchange the company launched an operational restructuring to cut costs and has sold off assets to reduce debt.

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