Digicel sells $1.4bn of high-yield bonds

Denis O'Brien's newly-formed Bermuda vehicle Digicel Group has sold $1.4 billion (€1.06 billion) of high-yielding junk bonds to help fund his buyout of the minority investors in Digicel, his Caribbean mobile phone empire.

Completion of the sale, which Digicel made public last night on its website, brings Mr O'Brien a step closer to realising a profit of $700-$800 million on a refinancing of his interest in Digicel.

Minority shareholders such as Mr O'Brien's father Denis snr and his associates Leslie Buckley, Lucy Gaffney, Greg Sparks, Séamus Lynch and PJ Mara, will net between $5 million and $70 million each when the transaction closes next Tuesday.

In a positive bond market, strong investor demand for the Digicel Group notes meant Mr O'Brien was able to trim the yields on the two-part sale from the original guidance price.

Digicel Group sold $1 billion of senior notes due in 2015 at a yield of 8 per cent, down from original guidance of 9¼ per cent.

The group also sold $400 million in "toggle" notes, which can pay out interest in cash or additional notes at the discretion of the issuer. Due in 2015, the "toggle" notes were sold at a 9per cent yield, down from the guide price of 9½ per cent.

The placing, after a roadshow this week in the US, is the first part of a transaction which will see Mr O'Brien and Digicel Group buy out Digicel Ltd, the vehicle which currently runs the Caribbean business, for some $2.4 billion in cash.

This deal will be funded from Mr O'Brien's personal resources and by the money raised this week in the New York bond market. The deal values Mr O'Brien's 78 per cent stake in Digicel Ltd at $1.87 billion. He will reinvest about $1.1 billion in Digicel Group, leaving him to receive the balance.

Mr O'Brien and his associates invested a total of some $150 million between them when they established Digicel in April 2000. Other shareholders include Digicel's staff, who own about 10 per cent of the business, and private equity group Blackstone Group, which has 3 per cent.

The refinancing deal was developed as an alternative to Mr O'Brien's plan to float Digicel on the New York Stock Exchange. He has also shelved plans to launch Digicel in the US as a mobile virtual network operator.

In a note last week, Fitch Ratings said Digicel's debt levels have been increasing rapidly as a result of acquisitions and necessary funding for the rapid build-out of its business in Haiti and Trinidad and Tobago.

"The proposed $1.4 billion issuance at the new controlling company Digicel Group will further burden the company with debt." Fitch told potential investors. - (Additional reporting Reuters)