Digicel, the mobile phone group founded by Irish businessman Denis O’Brien, has said it is co-operating with the US department of justice (DOJ) as it faces an investigation over possible breaches of country’s anti-corruption laws covering activities in foreign countries.
The company, which is headquartered in Jamaica but uses the US bond market to raise borrowings, made a voluntary disclosure to the department of information “relating to possible violations of the US Foreign Corrupt Practices Act”, according to a spokesperson.
Digicel is “co-operating fully” with the DOJ and will continue to do so, the spokesperson said.
“Digicel is committed to conducting business in adherence with laws and regulations of the jurisdictions in which we operate, supported by a rigorous ethics and compliance programme,” the Digicel spokesperson added.
“We take compliance very seriously and are continually assessing and enhancing our compliance policies and procedures to ensure we uphold the highest standards across the company.”
The group, in which Mr O’Brien lost control in January after a group of bondholders seized 90 per cent of business in a $1.7 billion (€1.62 billion) debt-for-equity swap, declined to give further details. The matter was first disclosed to bondholders on Friday, Bloomberg reported on Tuesday.
The controlling bondholder group is led by led by PGIM, Contrarian Capital Management, and GoldenTree Asset Management. The deal reduced Mr O’Brien’s stake to 10 per cent and Digicel’s debt to an estimated $3.1 billion. Total borrowings had peaked at more than $7 billion in early 2019.
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A spokesman for Mr O’Brien, who remains on Digicel’s board and may ultimately end up with as much as 20 per cent of the group subject to it reaching certain targets, was not immediately available for comment.
The US Foreign Corrupt Practices Act was enacted in 1977 for the purpose of making it unlawful for certain classes of persons and entities, including overseas companies with securities tradable in the US, to make payments, gifts or offers of anything of value to foreign government officials to assist in obtaining or retaining business.
A spokesperson for the DOJ declined to comment, according to Bloomberg.
Digicel operates in 25 markets across the Caribbean and Central markets, has spent €5 billion since it was founded in 2001 building out mobile and other telecoms networks across emerging and sometimes frontier nations.
The group’s earnings slumped in recent years amid declining voice sales and currency fluctuations across its markets, compounded by economic, political and social upheaval in one of its key locations, Haiti.
A surge in gang violence in recent weeks in Haiti is said to have prompted a number of international aid organisations to scale back staffing levels in the former French colony.
The disclosure to bondholders last Friday, in its latest quarterly report, said that Digicel cannot predict the outcome of the process with the DOJ, but highlighted the risk that it could have a material impact on its financial results and an adverse effect on its reputation, according to sources.
It added that the board has focused on assessing and enhancing its compliance policies and procures, they added.
Digicel posted a rebound in earnings in the financial year to March, a period in which the group of bondholders took control.
Underlying earnings before interest, tax, depreciation and amortisation (Ebitda) rose 7 per cent to $766 million (€707 million), following several years of almost uninterrupted earnings decline, sources told The Irish Times in August.
Service revenues for the period increased by 5 per cent on an underlying basis to $1.8 billion. Reported earnings and revenues both rose 3 per cent.
The trend has continued into this year, with bondholders being advised that Ebitda should grow by 3-6 per cent in the current quarter, the sources added.
