Mon | Dec 17, 2018

Digicel bond swap extended again

Published:Friday | November 16, 2018 | 12:00 AM
The top of the Digicel Building on the Kingston waterfront, headquarters of the telecoms group.

Telecommunications provider Digicel Group has delayed yet again the deadline for its offer to bondholders, aimed at extending the timeline for repayment on US$3 billion of its debt by two years.

Separately, Jamaican securities firm, JMMB advised bondholders in two separate reports to accept the new offer by telecoms Digicel Group, saying that holding out might result in them being unable to sell the bonds.

The new deadline is November 30.

Digicel said in a statement that it "continues constructive discussions with an ad hoc group of noteholders regarding the exchange offers and consent solicitations". It's been negotiating with the group since September.

JMMB said on Thursday that it had nothing new to add regarding its former advice.

"Our recommendation is for bondholders to ACCEPT this offer," the securities firm emphasised in its second research update following Digicel's initial extension of the deadline.

JMMB argued that the yield for bondholders would be high - in excess of 20 per cent on hard-currency notes - and that holdouts would be in a "precarious position" as a successful offer would result in existing bonds finding no protections and trading in a very illiquid market - making them hard to sell.

Digicel's largest shareholder and founder Denis O'Brien started the telecom in Jamaica and expanded the network to more than 30 markets.

The original exchange offer was set to close September 28, with early tenders accepted by September 14. But as resistance to the offer built, Digicel extended the offer to October 19, then to November 2, then November 16, and now the latest extension is November 30.

The refinancing offer involves swapping US$2 billion of bonds due for repayment in 2020 for new bonds due in 2022 at the same coupon rate; and extending the maturity of US$1 billion of bonds due in 2022 to 2024 at a more attractive rate.

The group which represents some 60 per cent of the funds set for refinancing has opted in the past for an extension in order to continue negotiations for a deal more favourable to them, which includes the withdrawal of the original extension.

The refinancing of the debt would allow Digicel additional years to avoid paying out the principal on the bonds while reducing its debt overall to levels which the rating agencies deem reasonable. Digcel Group's leverage was around 6.5 times its adjusted earnings prior to the sale of cellular towers in October. The telecoms indicated that it expects to reduce its leverage by one turn, which represents a reduction to 5.5 per cent, with the sale of some of its cellular towers.

steven.jackson@gleanerjm.com