Digicel’s bondholders back refinancing plan

Cantillon: group has used cheap funding to refinance well over $1bn of borrowings

In February Digicel  announced plans to cut 1,500 jobs, or a quarter of its workforce, over 18 months

In February Digicel announced plans to cut 1,500 jobs, or a quarter of its workforce, over 18 months

 

It hasn’t been an easy six months for Digicel.. In December debt research firm CreditSights said Denis O’Brien’s Caribbean-based phone group faced a “cocktail” of risks as it grappled with sliding currencies in some markets and “cash burn” amid falling revenues from mobile calls and an ongoing heavy investment in its fibre network.

The research firm warned that Digicel’s $6.2 billion (€5.6bn) debt was “unsustainably high” at 6.2 times earnings, and that it had no “equity cushion” to withstand a major shock.

Its financial state was compounded by the fact that O’Brien had received $1.1 billion (€1bn) in dividends from Digicel in the three years to 2015, before the group made an abortive attempt to float on the New York Stock Exchange.

But Digicel has knuckled down in recent months. In February it announced plans to cut 1,500 jobs, or a quarter of its workforce, over 18 months, and enter a multiyear contract with Chinese telecoms equipment and systems company ZTE to upgrade its network. The deal would see its investment levels ease following years of heavy spending.

More recently the group has taken advantage of cheap international debt funding to be able to refinance well over $1 billion (€0.9bn) of borrowings that fall due in the next three years.

It increased the amount it plans to raise on Monday due to demand from lenders. The group’s all-important bond investors having given the plan their backing: the value of $2 billion (€1.8bn) of bonds due in September 2020 reached a 2½-year high on Monday of 95c on the dollar, up from 81c in November.