Wednesday 19 June 2019

Digicel wins bondholder acceptance for second element of offer to swap debt for longer dated facilities

Digicel owner Denis O’Brien. Photo: Tony Gavin
Digicel owner Denis O’Brien. Photo: Tony Gavin
Donal O'Donovan

Donal O'Donovan

Digicel has won overwhelming bondholder acceptance for the second element of its offer to swap debt falling due in 2020 and 2022 for longer dated facilities.

Taken together the exchanges allow the Denis O'Brien-owned telecommunications group to to push out repayments on a total of $3bn (€2.59bn) of outstanding debt.

On December 21, holders of $1bn of bonds due in 2022 accepted the deal - by a vote of more than 95pc in favour. Their bonds will now fall due in 2024.

That followed similar levels of support in an earlier exchange, on December 18, when holders of almost $2bn of bonds originally due to mature in 2020 agreed to swap them for new bonds maturing in 2022.

It follows months of negotiations.

Digicel's total debts are just under $6.8bn.

Bondholders were won over after the company sweetened the terms on offer - including making $580m of part 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.

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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