Digicel secures $150m bank facility as IPO remains on ice

Denis O'Brien's Digicel is understood to have agreed a $150 million (€134.3 million) banking credit facility to bolster its financial flexibility as the mobile phone operator keeps plans to raise equity and float on the stock market on hold.

While the Bermuda-based group decided last November to scrap plans to raise up to $2 billion and list on the New York Stock Exchange it only formally withdrew its filing with the US Securities and Exchange Commission last week.

“The company is requesting such a withdrawal in light of currently unfavourable market conditions that make any offering of common shares by the company inopportune,” it said in a statement, dated August 26th.

Digicel's chief executive Colm Delves told The Irish Times at the end of June that he didn't expect to make another attempt to float the business for 12 to 18 months, although he said at the time that the company will remain "opportunistic".

The group’s earnings, which dipped 1 per cent to $1.165 billion in the year through March amid currency weakness in several of its markets across the Caribbean and South Pacific regions, declined further in its fiscal first quarter amid ongoing foreign exchange woes.

“Digicel reported weak results, especially in Papua New Guinea, while FX (foreign exchange) headwinds continues to be a significant drag on earnings,” CreditSights, a credit research company, said.

It is understood that Digicel’s net debt fell slightly year-on-year in June. The figure stood at $6.156 billion at the end of June 2015, after subtracting the company’s $312.5 million cash position from its total borrowings.

However, CreditSights said that the company’s leverage, or debt in relation to earnings, “continues to rise and is now at very high levels.”

Digicel's subscribers across 33 markets rose by 200,000 to 13.9 million during the quarter to the end of June. Mr O'Brien founded the company in Jamaica in 2001, a year after he got $285 million from the sale of his shares in mobile phone company Esat Telecom to British Telecom.

“Digicel doesn’t publish quarterly earnings but we’re very pleased with underlying first-quarter performance in local currency,” a spokesman for the company said. “Digicel’s outlook remains positive as we monetise our substantial network investment in recent years.”

Mr Delves had said in June that Digicel planned to spend between $150 million and $200 million less in the current financial than the $590 million invested last year developing the group’s networks.

CreditSights welcomed the company’s lower capital expenditure levels in the first quarter.

It emerged in April the Mr O’Brien had started in the second half of 2015 to waive his $10 million-a-quarter cash dividend payments until business improves.

Digicel’s $2 billion of bonds, which fall due in 2020, have recovered from a low of 77 US cents on the dollar in February to 91 cents, helped by a recovery in investor appetite in high-yielding debt in emerging markets over the course of the year.