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Digicel's €1.5bn bond move slashes its borrowing costs

IRISH-owned Digicel has completed a major €1.5bn refinancing and cut its borrowing costs after tapping the global bond markets, in one of the largest deals of its kind for a company based in the Caribbean or Latin America.

The mobile phone company owned by billionaire businessman Denis O'Brien raised $1.5bn (€1.14bn) through a new corporate bond offering.

The new bonds are due to be repaid in 2020 and offer a yield, or interest rate, of 8.25pc for investors.

Proceeds have been used to buy back and cancel €1.25bn of older bonds that were originally due to mature in 2015 and carried higher interest rates of 9.125pc and 9.875pc.

It means the effect of the refinancing is to cut the company's borrowing costs and push back its debt maturity profile.

The deal is more than double the size expected when Digicel first announced its refinancing plan on September 5. Strong investor demand meant that even the larger bond issue was oversubscribed, with the same amount of money again offered to the company by investors but declined.

Digicel initially indicated plans to raise $700m in the markets, and offered to buy back the same amount of older debt.

In the end, the successful new issue allowed the company to offer to redeem all $1.4bn of bonds falling due in 2015, with some investors opting to hold the paper rather than roll into the new deal.

Digicel said 82pc of the holders of one of the 2015 bonds and 91pc of a second class accepted its tender offer.

"This transaction has again been extremely well supported by the international financing community having been more than twice over-subscribed. We are very pleased to have priced this transaction at 8.25pc. The funds allow us to refinance our existing 2015 bonds at an attractive rate," Digicel chief executive Colm Delves said.

The financing was arranged by Wall Street banks Citi, JP Morgan, Credit Suisse,and Deutsche Bank along with Dublin-based Davy's.

"We are pleased to have helped Digicel leverage the strong market conditions to refinance existing bonds at a great rate. This is among the largest high-yield deals ever to come out of the Latin and Caribbean region," said Blake Haider, a director with Citi.

Bermuda-based Digicel Group is active in 30 markets across the Caribbean, in Central America and the Pacific, including major operations in Jamaica and Haiti. It serves 13 million customers.

Earnings at the 11-year-old company topped $1bn for the first time earlier this year, after climbing 13pc to $1.08bn in the 12 months to the end of March. Earnings are increasing thanks to growth in data revenue fuelled by a 4G mobile service available in 14 Digicel markets.

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