Digicel plans $50m transformation investment as creditors eye control

Digicel, Denis O’Brien’s heavily indebted telecoms group where creditors have moved to take control, plans to invest about $50 million (€47.3 million) in a transformation programme to boost revenues and improve efficiency in an effort to reboot earnings, according to sources.

It is understood about half of the planned investment will be provided for in the company’s current financial year that comes to an end on March 31st, with the remainder taken in the next fiscal period. The programme will involve a series of initiatives.

The company said on Wednesday that a proposed restructuring would see its borrowings fall by $1.8 billion as bondholders swap much of its debt for equity. It added that the resulting $110 million of annual interest savings would help ensure “cash to fund operations and invest in key growth areas”, underscoring how both sides to the restructuring talks see the need for investment to turn the group around.

Sources familiar with details of the plan said holders of bonds in two group subsidiaries, Digicel Limited and Digicel International Finance Limited, were on track to swap almost $1.18 billion of notes for a direct initial 90 per cent equity stake in the operating business.

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Mr O’Brien owns 99.9 per cent of the group he founded in 2001, which has operations in 25 markets across the Caribbean and Central America.

[ O’Brien finally runs out of road at Digicel as creditors swoop to capitalise ]

He could see his stake ultimately recover somewhat to as much as 20 per cent, as a result of shares and warrants awarded as an incentive for him to stay involved in the business and maintain key relationships in its markets, the sources said.

Digicel has reached agreement in principle with investors in about half of its $4.55 billion of bonds and corporate loans on the debt restructuring proposal. However, negotiations on a final deal are ongoing.

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The company has guided investors that earnings before interest, tax, depreciation and amortisation (Ebitda) for its current financial year to the end of March will fall by almost 5 per cent to about $700 million, stripping out the performance of its former Pacific business, which was sold last July, sources said.

It has also sees Ebitda picking up next year in the expectation Haiti, one of its key markets, where earnings have been hit severely amid a political, economic and humanitarian crisis, will recover somewhat and the company will start reaping the benefits of the transformation programme.

Bondholder sources say Digicel will end up being put up for sale in the medium term by the creditors-turned-shareholders.