Denis O’Brien set to lose control of Digicel in $1.8bn debt-cut plan

Businessman on track to cede control under plan agreed with a group of bond creditors

Denis O'Brien is on track to lose a controlling stake in Digicel as the company embarks on its third debt restructuring in a little over four years.

Businessman Denis O’Brien is on track to cede control of Digicel under a plan agreed with a group of bond creditors to swap $1.8 billion (€1.7 billion) of the heavily-indebted group’s borrowings for an equity stake in the business.

Digicel said in a statement issued in the early hours of Wednesday that Mr O’Brien has “endorsed” the proposed comprehensive restructuring, which will see him “remain actively involved in the business as a director and retain an equity interest”.

Market sources say that bondholders behind the debt being written off will end up with a majority stake in Digicel, the jewel in Mr O’Brien business empire that he set it up in Jamaica in 2001 after netting about €200 million from his sale of Esat Telecom to BT Group the previous year.

Background: O'Brien deal caps years-long battle to manage Digicel debtOpens in new window ]

The company, which operates in 25 markets across the Caribbean and Central America, said continues to engage with creditors on the proposal, which has been agreed in principle with a group of bondholders who own about half of Digicel’s debt.

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“While no definitive agreement concerning the material terms of the proposed transaction has been reached and no assurances can be provided that an agreement will be reached, based on momentum to date and agreement in principle on key terms, the company believes a consensual and comprehensive restructuring is achievable,” Digicel said.

The plan follows two debt restructurings at Digicel in the past four years, with the latest, in 2020, resulting in bondholders writing off $1.6 billion of the group’s then $7 billion debt pile, knowing that they stood to lose way more if the company succumbed to liquidation at the time.

While Mr O’Brien injected $50 million – including cash and property – into Digicel as an incentive to get the last restructuring over the line, this time round bondholders are seeking a large equity stake in exchange for reducing the amount they are owed. A deal to cut Digicel’s debt by $1.8 billion would equate to about 40 per cent of the company’s $4.55 billion of bonds and corporate bonds outstanding.

Fitch, the credit ratings agency, said last week that Digicel’s borrowing levels are “unsustainable” relative to earnings, particularly given that the company had issued a profit warning on Haiti, one of its main markets, last November amid a political, economic and humanitarian crisis in the country.

Digicel said that it entered talks with a group of bondholders, who were due to be repaid $925 million on Wednesday, shortly after completing the sale last July of its unit in the Pacific. Initial proceeds from that deal had been used to pay down $1.2 billion of borrowings.

Although Digicel had at first only sought to extend the repayment date for the March 2023 bonds a “deteriorating and unprecedented situation in Haiti since September 2022 led the company to shift its focus to a more holistic solution for the company’s capital structure”.

The resulting proposed deal “would, if and when consummated, reduce the group’s consolidated debt by approximately $1.8 billion and reduce its annual cash interest by approximately $110 million while ensuring sufficient cash to fund operations and invest in key growth areas”, it said.

Holders of the bonds that were due on Wednesday agreed last week to give Digicel a 30-day grace period to allow for debt restructuring talks to continue.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times