Mon | Jan 25, 2021

Digicel aims to write off US$1.7b debt through refinancing

Published:Wednesday | April 8, 2020 | 12:15 AM
Chairman of Digicel Group, Denis O'Brien.
Chairman of Digicel Group, Denis O'Brien.

Digicel Group plans to slash a quarter of its debt in a major refinancing deal that it says already has buy-in from large bondholders, including lock up agreements for two bonds.

The company proposes to shave US$1.7 billion of debt, from its current levels of US$7 billion to US$5.3 billion, by refinancing four bonds.

“Digicel is very pleased at the pre-launch support secured from the largest bondholders across the structure, including approximately 50 per cent lock ups for two of the bonds, marking a strong start to a process,” Antonia Graham, head of public relations at Digicel Group, told the Financial Gleaner. “We cannot comment on individual bondholders,” she added.

Digicel’s creditors, which also include institutions and small investors locally and overseas, will need to decide whether to accept the new notes by mid-April or sell the bonds, which are trading below par and missed an interest payment last month. The non-payment led rating agency Fitch to downgrade Digicel’s debt.


The offer intends to refinance four main bonds by extending the maturities by about two years and staggering the coupon rate, depending on the bond. Graham said that some new bonds will carry a “larger coupon and some a smaller coupon”, depending on where they sit in the capital structure.

Digicel said the US$1.7 billion it aims to shave off its debt would reduce its annual cash interest payments by approximately US$130 million and extend its maturities, but didn’t say how it plans to use those savings.

The telecom has US$3.3 billion in debt maturing by 2022, according to current statements on its bonds.

Under its refinancing offer, Digicel will exchange existing debt of DGL1, DGL2 and DL notes for various new securities. It will secure a portion of the notes by putting up its operations in the Pacific as collateral. The other notes will be unsecured and therefore accrue a higher interest rate than the secured notes.

Digicel and its supporting large bondholders signed a lock-up and support agreement on April 1, representing approximately half of the existing Digicel Group One Limited DGL1 notes and half the Digicel Group Two Limited DGL2 2022 notes, about 15 per cent of Digicel Limited DL2024 notes, and about 30 per cent of Digicel Holdings notes due 2021.

The new bonds to be issued will mature between 2024 and 2027.

Digicel has formed a new holding company, called Digicel Group 0.5 Limited, to execute the bond swaps.

Last year, local investment firm JMMB Group had advised clients to consider selling their Digicel bonds as they were trading well below par. Its midyear advice came after a January refinancing of certain Digicel bonds that pushed their maturity out by two years to 2022 and 2024. JMMB’s promised response for comment on its current guidance to clients in the wake of this new round of refinancing was not forthcoming up to press time.