DENIS O’BRIEN’S mobile phone company Digicel yesterday completed a $500 million corporate bond fundraising that allows it to refinance other debt at a more attractive interest rate.
The money will be used to repurchase $450 million of senior notes outstanding that had been due for repayment in 2012 and which carried a coupon – or interest rate – of 9.25 per cent. The new funds are due to be repaid in 2017 and carry a coupon of 8.25 per cent.
Speaking to The Irish Times from the Caribbean, Digicel chief executive Colm Delves said: “We’re very happy with this; it’s a very good coupon.”
When asked how Digicel secured a better interest rate given the global credit crunch, Mr Delves said: “It’s down to how the business is performing.”
Digicel last month reported a 10 per cent increase in its half-year Ebitda (earnings before interest, tax, depreciation and amortisation) to $364 million. Mr Delves said Digicel free cashflow “jumped dramatically” during the period to $141 million from $58 million in the corresponding period of 2008.
“This is a big factor when you are dealing with bondholders and banks in general,” he added.
Mr Delves said the lower interest rate would save the mobile phone group “a couple of million” dollars a year but Digicel had to “pay a premium” for buying back the other debt early. He said Digicel would have net proceeds from the bond issue of $12million-$13 million that would be used for working capital purposes.
Digicel has operations in 32 counties in the Caribbean, central America, and the Pacific Islands with a combined 10.3 million subscribers. They employ 4,500 staff between them.
Mr Delves confirmed that Digicel is looking at a number of new markets. “We could get to 40 markets over the next 12 to 18 months,” he said.
Digicel is considering participating in an auction process in Costa Rica next year, when three mobile licences are expected to be advertised. “We need to get more information on the [auction] terms and then make a call,” he said. It is also looking at entering Belize, a former British colony in Central America.
In the Pacific, Digicel recently opened in Nauru, which has a population of just 10,000. It is now looking at the Solomon Island and Timor-Leste. Digicel has operations in six Pacific islands with a combined 1.5 million subscribers.
“It’s growing well and it’s profitable for us at this stage,” he added.
Mr Delves said Digicel is also eyeing opportunities in Asia. “We’re having preliminary talks but there’s nothing on the immediate horizon.”
Digicel Group, which operates its Caribbean and central American operations (which have 8.8 million customers), has net debt of $3.2 billion, more than four times its Ebitda. Mr Delves said the company was “comfortable” with its debt ratios. “It was more than eight times in February 2007,” Mr Delves said.
On an annualised basis, Digicel has Ebitda of more than $700 million. It also has cash on its balance sheet of $500 million.
