Denis O’Brien’s Digicel said bondholders in the holding company at the top of the deeply distressed telecoms business have agreed to write down part of what they are owed, as the group continues talks on a wider restructuring that will see the businessman cede a 90 per cent stake.
A representative group for holders of $438 million (€409 million) of so-called senior payment-in-kind (PIK) notes in Digicel Group Holdings Limited (DGHL) have agreed to accept an initial $163.5 million in cash. However, they will retain rights over “certain future distributions from the proceeds of the sale of other remaining assets of DGHL”, the group said on Monday.
The shareholder group have accepted an initial $19.5 million cash payment for $215 million of subordinated PIK notes, but also continue to hold rights to potential certain future distributions from DGHL asset sales.
DGHL may receive as much as $200 million of earn-out payments in the coming years from the sale of its Pacific arm to Australia’s Telstra last October. It also has almost $100 million in escrow in Papua New Guinea relating to a surprise tax bill that landed after the Pacific sale was agreed. This is now the subject of international arbitration.
Huge uncertainty hangs over the recovery of each of these amounts.
Many of the holders of the bonds in DGHL are also invested in other debt classes across the wider Digicel group. The company agreed the outline of a deal in February that will see a category of bondholders swap $1.8 billion of Digicel debt for an initial 90 per cent of the business, while two other classes will end up writing off most of their investment.
Mr O’Brien’s holding will fall to 10 per cent as a result, though he may see his holding increase again to as much as 20 per cent should warrants attached as an incentive to the restructuring end up being exercised.
The wider, comprehensive restructuring deal is seen as “achievable in the near term”, Digicel said on Monday.
It is envisaged that the restructuring will be completed through a so-called scheme of arrangement carried out in Bermuda and rubber-stamped through a US reorganisation under Chapter 15 bankruptcy protection. This is similar to how Digicel carried out another debt restructuring in early 2020, when debt investors agreed to write off $1.6 billion of Digicel’s then $7 billion debt mountain.