DENIS O’BRIEN intends to raise $435 million (€345.8 million) through a private placement of bonds for his Digicel mobile phone group, with most of the funds to be diverted to his fledgling operations in central America.
The money is being raised by Digicel Ltd, a company incorporated in Bermuda and wholly owned by Mr O’Brien. It owns the company’s Caribbean operations, which cover 24 markets.
A total of $260 million of the money will be used to acquire an equity interest in Digicel Holdings (Central America) Ltd (DHCAL), which runs its new businesses in Honduras and Panama.
This is a sister company of the Caribbean business and is owned by Mr O’Brien and other long-standing associates and directors with Digicel. The balance will be used for “general corporate purposes” by the Caribbean concern.
It is not clear whether Mr O’Brien or his fellow shareholders in DHCAL will pocket any of the $260 million from the sale of equity. In a statement to The Irish Times, the mobile operator said: “Digicel has announced its intention to launch a $435 million bond issue. We will not be making any further comment on the deal until the process is completed.”
However, credit ratings agency Moody’s said it viewed the equity purchase by Digicel Ltd as an “effective stock buyback” from Mr O’Brien. In February 2007, Mr O’Brien acquired Digicel Ltd in a multibillion-dollar refinancing, a move that saw him net about $800 million personally.
Digicel’s other shareholders also earned big windfalls from that move. These included Cork-born businessman Leslie Buckley, Lucy Gaffney, PR executive PJ Mara, accountant Greg Sparks and Digicel executive Seamus Lynch.
Digicel’s operations in Honduras and Panama – launched late last year – require substantial cash to support the rollout of infrastructure and to incentivise customers to buy its services.
Moody’s yesterday downgraded Digicel’s outlook from positive to stable. It assigned a B1 rating to the new $435 million in senior unsecured notes to be issued, and affirmed Digicel’s “corporate family rating” at B2.
The agency upgraded its rating on Digicel’s $450 million senior unsecured notes, due in 2012, to B1 from B2. It affirmed the Caa1 rating on Digicel’s $1.4 billion in senior unsecured notes, which are due for repayment in 2015.
Founded in 2001, Digicel has operations in 31 countries in the Caribbean, central America and the Pacific Islands. It has more than 6.5 million subscribers and has invested about $3.4 million in its various operations.
Moody’s said yesterday that Ebitda-positive contributions from operations in Haiti and Trinidad Tobago had reduced Digicel’s “adjusted leverage” to about 4.5 times at the end 2008. This compares with about 10 times at recapitalisation in 2007.
Digicel recently cut its workforce by 450, or 10 per cent, in a move that cost it about $3 million. For the year to the end of March 2008, Digicel reduced its group pre-tax losses to $47.7 million compared to a deficit of $71 million a year earlier. Its revenues rose by 38 per cent to $1.56 billion, while operating profit increased sixfold to $240 million. Digicel was pushed into the red by interest payments of $296.4 million.
