Digicel extends bond swap offer after investor snub

Holders of more than 60% of debt in swap offer oppose current terms from Denis O’Brien group

The Denis O'Brien-controlled telecoms group Digicel has extended the deadlines for creditors to accept its offer to swap $3 billion (€2.5 billion) in debt for longer term bonds.

Lawyers for Digicel's bondholders yesterday rejected the company's offer, which involved swapping $2 billion of bonds due for repayment in 2020 for new securities due in 2022; and switching $1 billion of bonds due in 2022 for debt that would instead be repaid in 2024.

The new 2022 bonds would carry the same rate of interest as the current borrowings but the company was offering a more attractive rate on its new 2024 borrowings.

Digicel responded early on Tuesday by extending both the early acceptance deadline and the cut-off point for its offer to 11:59pm New York city time on October 19th. It had previously expected to close the transaction at the same hour this Friday, September 28th.


Alternative offer

Akin Gump, the bondholders' lawyers, said on Monday that creditors were prepared to enter talks on an alternative offer if Digicel extended the deadlines for acceptance or withdrew its original proposal.

Digicel said on Tuesday that talks continued with an ad-hoc group of the bondholders involved.

Holders of more than 60 per cent of the $3 billion debt that Digicel owes this group of creditors have already agreed not to tender their bonds to the company in response to its current offer.

Digicel, which operates networks in the Caribbean and South Pacific, owes creditors a total of $6.7 billion.

On August 31st, it announced the plan to exchange $3 billion of this debt for new bonds, offering 100 per cent of the total due and a 5 per cent premium to creditors who signed up by an early acceptance date of 5pm New York time on September 14th.

The company offered 95 per cent of the total due to bondholders who accepted the offer by the original cut-off point of September 28th.

Digicel subsequently extended both of those deadlines to 11:59pm on September 28th.

In its original offer, Digicel said it would repay the $2 billion bonds due in 2020 at the same 8.25 per cent interest rate if creditors accepted the new securities that would be repaid in 2022.

The company was prepared to increase the interest on the $1 billion bonds due in 2022 to 8.25 per cent from 7.125 per cent if creditors opted for the new debt that would be repaid in 2024.

Creditors’ rejection of the original August 31st offer has increased the pressure on Digicel, which recently reported a 2 per cent fall in revenue for the three months to June 30th.

Seven financial institutions, which are owed more than half the $3 billion between them, have formed an ad-hoc committee of creditors.

They have asked Akin Gump to request that other bondholders reject Digicel’s offer on its current terms, boosting the existing majority of creditors opposed to the deal.

Barry O'Halloran

Barry O'Halloran

Barry O’Halloran covers energy, construction, insolvency, and gaming and betting, among other areas