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Why would bondholders write off Digicel debt for O'Brien?

Lenders may see $1.7bn hit as their best option

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Digicel boss Denis O'Brien. Photo: Damien Eagers / INM

Digicel boss Denis O'Brien. Photo: Damien Eagers / INM

Digicel boss Denis O'Brien. Photo: Damien Eagers / INM

Denis O'Brien will be left $1.7bn (€1.6bn) better off if Digicel bondholders accept his proposal to slash what they are owed by his telecoms empire.

While Mr O'Brien will put in $50m to sweeten the deal - half cash and half by way of a Digicel office block he owns in Jamaica - lenders will take a massive hit just to keep the company afloat. Under the deal on the table, some bondholders who accept the offer now would get 49pc of Digicel in three years' time if they have not been repaid the new, lower debt in the meantime.

The 49pc stake is tied to a convertible bond. This means a class of bondholders who'll hold that convertible debt will potentially get almost half of Digicel three years from now, but only if things fall apart again in the meantime to the extent that even the new, lower debts cannot be honoured. As it stands though, Mr O'Brien will put up a relatively small stake to retain ownership of a newly cleaned-up Digicel with debts of about $5.3bn. He currently owns a version of Digicel that has debts of about $7bn.