Denis O’Brien’s Digicel sweetens terms for holdout bondholders

Mobile group aiming to wipe away about a quarter of $7bn debt

Businessman Denis O'Brien's Digicel has improved the terms of a bonds exchange offer for holders of $925 million (€851 million) of notes due in 2023 that are part of a massive debt restructuring plan aimed at wiping away about a quarter of its $7 billion of the phone group's borrowings.

Holders of these notes quickly emerged as the most resistant among five categories of bondholders targeted by the plan that was launched at the start of this month. The 2023 bonds are higher up the ranking order and enjoy greater protections than most of the other bonds subject to the distressed debt exchange.

Holders of less than 6 per cent of the 2023 bonds have so far signed up to being restructured, compared to rates of between 89.6 per cent and 98.5 per cent across the other categories that were being asked to accept more pain.

Digicel originally offered to exchange the $925 million of 2023 bonds for notes due in 2027 that were worth 85 per cent of what was owed. The company said on Wednesday that it is now offering as much as 95 cent on the dollar to the holdout investors. The main reason this particular group is being targeted is to push out ultimate repayment dates, rather than impose major losses on them.

Meanwhile, having received support from 98.5 per cent of holders of $1 billion of senior 2022 bonds to terms of their restructuring offer, the telecommunications group is now resorting to a legal mechanism, or scheme, to impose the deal on the remaining bondholders in this category.

Unsustainably high

The overall restructuring is aimed at reducing Digicel’s total debt by almost 25 per cent from its current level of $7 billion, which is viewed by the company and bondholders as unsustainably high following years of declining earnings.

Digicel’s bonds have tumbled in value in the past 12 months amid mounting concerns about how the group could support its debt mountain following earnings declines in recent years.

The company, set up by Mr O’Brien in 2001, operates in 32 markets across the Caribbean, Central America and Asia Pacific regions.

Digicel has spent $6 billion developing its networks and the business has 14 million subscribers. Mr O’Brien took at least $1.9 billion of disclosed dividends out of the group between 2007 and 2015.

The current debt negotiations come a little over a year after bondholders who were owed almost $3 billion agreed to postpone getting their money back by accepting longer-dated notes in exchange for their holdings.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times