Digicel bond sale raises €330m from investors

DENIS O’BRIEN’S Caribbean mobile network operator, Digicel, is borrowing €330 million through a bond sale to institutional investors to refinance part of the group’s €2.5 billion debt.

Digicel Ltd, one of the group’s subsidiaries, has issued $500 million (€334 million) in new bonds, due for repayment in 2017 at a rate of 8.5 per cent.

The company intends to use the money raised to repay $450 million in bonds that are due to be repaid in 2012. Those bonds were issued with a return of 9.25 per cent.

The overall group has total debts of $3.7 billion, according to Gerald Granovsky, analyst with ratings agency Moody’s.

The agency this week ranked Digicel’s latest bond issue as “B1”, which means that Moody’s classes the instruments as a speculative investment.

Mr Granovsky said that there was debt at a number of levels within the group. The parent, Digicel Group Ltd, has debts of $1.4 billion, while another subsidiary, Digicel International Finance Ltd, has a senior, secured credit facility of $1 billion.

Part of Digicel Group Ltd’s debt dates back to early 2007, when Mr O’Brien, who then owned 78 per cent of the business, took control of the entire enterprise and bought out its other investors, which included venture capitalists and his associates, Leslie Buckley and Lucy Gaffney.

Mr O’Brien made a profit of around €600 million from the deal. He was both a buyer and a seller in the transaction, as he sold his stake in the business to Digicel Group Ltd.

The overall transaction involved the group borrowing $2.4 billion, much of it in high-yield bonds.

Moody’s rating for total group debts is B2, which is a lower grade than B1, implying greater risk for lenders.

In July, Digicel raised $160 million from another high-yield bond issue. The group used the cash to finance its expansion into El Salvador.

At the time, the offer was oversubscribed, which the company said was evidence of its continued good standing in global credit markets.

Credit Suisse, Citigroup and JPMorgan & Chase arranged the bond sale, and the instruments were bought by financial institutions.

Digicel is based in Bermuda and operates mobile networks in the Caribbean, Central America and south Pacific.

The group has been in business since 2001. Last week, it reported that it made an operating profit of $364 million during the six-month period ended on September 30th.

It achieved those profits on revenues of $857 million. Digicel also reported that it increased subscriber numbers by 7 per cent over the previous 12 months, to 7.3 million.

Digicel has a high profile in all countries where it operates, largely down to intensive marketing, part of this involves sponsorship of various events and national teams.

It sponsors the Fijian rugby team, which Ireland defeated at the RDS on Saturday. The company also sponsors cricket, racing and runs a charitable foundation.