Digicel decision follows familiar pattern
Cantillon:Digicel’s decision to increase its latest capital raising to $1 billion from $700 million follows a familiar pattern at the mobile phone company.
It announces a figure, quickly tests the demand for the debt issuance, and then increases the size of the offering.
Global credit markets might still be constrained at present but there remains a huge appetite for Digicel’s debt.
Digicel Limited, the entity conducting this capital raising, will have gross debt of $3 billion once this issuance is complete.
In addition, parent company Digicel Group Ltd (DGL) has $2.275 billion in bonds outstanding with investors.
The latest capital raising by Digicel has heightened speculation that it might pay another significant dividend to Denis O’Brien, its founder and chairman who owns about 94 per cent of the group on a fully-diluted basis.
The prospectus for the $1 billion fund raising states that Digicel intends to use the proceeds to repurchase $510 million in senior notes that are due to be repaid in 2014.
Digicel Ltd is offering to pay $1,068 for every $1,000 in issuance so the total cost of redeeming these notes would be $545 million.
The net proceeds from the bond offering, after various fees are deducted, is expected to be $990 million.
What will Digicel do with the balance of $445 million?
The prospectus states that the funds will be used for “general corporate purposes”, including dividends to its parent company DGL.
DGL might then pay a dividend to Mr O’Brien, who owns 94 per cent of Digicel on a fully diluted basis.
In the year to the end of March 2012, DGL paid a dividend of $115 million to shareholders. Subsequent to that year end, DGL paid an additional $310 million to its owners.
Another healthy dividend from DGL would be timely for Mr O’Brien given that he needs to refinance his loans with the liquidators of IBRC or face having them placed with the National Asset Management Agency.
He might also be required to kick in some funding to the financial restructuring of Independent News & Media, where he is the biggest shareholder.
Homeowners fine may be wide of mark
Reports that recalcitrant homeowners may face €100 a day fines if they ignore letters from the Revenue Commissioners regarding the property tax may be a little wide of the mark.
Section 151 of the Finance (Local Property Tax) Act 2012 – does indeed provide that if a “a relevant person” does not supply information needed by the Revenue Commissioners to allow them establish and maintain a register and administer the property tax then that person “shall be liable to pay a penalty of €100 for each day the failure continues after the time limit specified in the notice”.
The key issue here is what constitutes a relevant person and they are helpfully listed in section 153 and comprise pretty much every state agency, company or Government department that might have useful information.