Digicel debt talks extended
DIGICEL now has until the end of this month to formalise a restructuring agreement with creditors, which would “recapitalise the business and place it on a firm and sustainable footing for the future”.
The Jamaica-based telco made the announcement Friday as the next step in debt restructuring discussions it is having with its creditors that would see US$1.8 billion of borrowings – or about 40 per cent – written off as bondholders swap much of its debt for equity. Two other categories of bondholders will end up writing off most of their combined US$640-million investment. That would see Digicel founder’s stake in the entity falling from over 90 per cent to as low as 10 per cent.
Digicel entered the restructuring after not having enough money to repay US$1.3 billion of bonds that were due at the start of March. Creditors initially granted it a 30-day grace period to March 30 to secure a wider agreement on borrowings. However, at the expiry of that period last Thursday, Digicel announced it reached an agreement in principle on key terms of the debt restructuring with creditors holding 75 per cent of its debt. With not enough time to complete the discussions before the March 30 deadline, an agreement was reached for a 15-day extension to hammer out the fine details of the amendments that were proposed. That first 15-day period can then be extended by another 15-day period, if necessary.
“The extension of the grace period will facilitate the finalisation of definitive documents arising from constructive and ongoing discussions,” Digicel said in a release, while noting, “there can be no assurances that they will be consummated”.
An ad hoc group of so-called crossover bondholders, who own large portions of various categories of Digicel debt, have also agreed to back the restructuring, Digicel said.
Still, Digicel is facing court action over the debt from some of its bondholders, particularly those holding debt from its holding company, Digicel Group Holding Limited (DGHL).
“Certain holders of the DGHL notes…are actively pursuing rights they assert that they have under their debt instruments. However, DGHL is a non-operating holding company and neither actions by its creditors nor the deferral of this interest payment are expected to materially affect the proposed restructuring,” Digicel said.
That dispute stems from Digicel electing to forego paying interest on debt that was due April 1, 2023 to the bondholders.
Digicel, founded by Denis O’Brien in 2001, has spent €5 billion over more than two decades building out mobile and other telecoms networks across as many as 33 markets, funded mainly by junk bond sales. O’Brien also extracted at least US$1.9 billion of dividends from the group between 2007 and 2015.
The company has gone through two other debt restructurings in recent years. The businessman may ultimately end up with as much as 20 per cent of the company, should warrants attached as an incentive to the latest restructuring end up being triggered.