Digicel founder Denis O’Brien and bond investors have signed a deal that will see the businessman lose most of his stake in the telecoms group in exchange for a $1.7 billion (€1.55 billion) debt write-off.
The so-called restructuring support agreement will also see group chairman, Mr O’Brien, retain a board seat, Digicel said on Tuesday, even though sources have said that his stake will ultimately fall to 10 per cent.
The debt-for-equity exchange was originally referred to as a $1.8 billion transaction at the end of February, when Digicel outlined the plan after months of talks with some of its larger bondholders.
It is understood, however, that the difference between that figure and the one in the final announcement is largely down to rounding and costs.
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The Jamaica-based group’s annual cash interest expense reduced by approximately $120 million, whilst ensuring sufficient cash to fund operations and investment in key growth areas, the statement said.
The restructuring is on track to be completed in the coming months through a so-called scheme of arrangement carried out in Bermuda and rubber-stamped through a US reorganisation under Chapter 15 bankruptcy protection.
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This is similar to how Digicel carried out another debt restructuring in early 2020, when investors agreed to write off $1.6 billion of Digicel’s then $7 billion debt mountain.
“This agreement is a very positive step for the future sustainability of our business and, on behalf of the company, I want to thank our debtholders for their support and constructive stance in achieving this consensual outcome,” said Digicel chief executive, Oliver Coughlan.
[ Digicel debt saga: a timelineOpens in new window ]
“The fundamentals of our business remain strong, thanks to our dedicated and loyal staff, customers and vendors across our 25 markets in the Caribbean and Central America.”
Mr Coughlan said that it is expected that the debt restructuring will conclude later this year and that “it will continue to be business as usual during the implementation phase”.
The restructuring deal will see holders of almost $1.18 billion of bonds convert their investment into an initial 62 per cent stake. It is understood, however, that the stake will increase to 90 per cent as the bondholders-turned-equity participants take part in a $110 million rights issue and further backstop agreement.
The group of bond investment firms that are poised to take control of Digicel include US-based PGIM, formerly Prudential Investment Management, GoldenTree Asset Management and Contrarian Capital Management.
Certain other categories will see part of their investment being written down or payback dates extended.
Digicel, founded by Mr 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. Mr O’Brien also extracted at least $1.9 billion of dividends from the group between 2007 and 2015.
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.
