D-Day has arrived and Digicel as it is known will be reconstituted.
A debt payment of US$925 million was due today (March 1) but the telecoms company was unlikely to make that deadline and has now opted for a more comprehensive restructuring of its US$4.5-billion debt mountain.
Bondholders have placed a ‘Proposed Transaction’ before founder and chairman Denis O’Brien and his team which would significantly reduce its debt by US$1.8 billion and allow it to continue operating.
BONDHOLDERS KEEN ON RESOLUTION
It must be stressed here that the proposal is yet to be consummated and may very well see O’Brien with a reduced role in the company he built, with a seat on the Board as a director and an equity stake in a recapitalised business.
After undergoing several debt rescheduling exercises in a short period, the bondholders are keen to attain a resolution of the Digicel situation and address its debt problem.
These bondholders have leverage holding 78 per cent of the DL Notes and 58 per cent of the Digicel International Finance Limited International (DIFL) Notes due in 2026.
Of particular concern is the 39 per cent of the DIFL Secured Notes due next year as well as the 35 per cent term loans. The year after that sees 64 per cent of the DIFL Unsecured Notes coming due together with Digicel Group Holdings Limited’s Perpetual Convertible Notes.
This amounts to wave after wave of debt repayments which means Digicel has to produce revenue in a high interest rate environment, with a re-energised competitor and ever-changing telecoms technology. This is not a propitious time for junk bonds.
Digicel put out a statement which read, in part: “The company continues to engage in productive negotiations with bondholders regarding the Proposed Transaction, including among others, with additional holders of the DIFL secured indebtedness. While no definitive agreement concerning the national terms of the Proposed Transaction has been reached and no assurances can be provided that an agreement will be reached, based on momentum to date and agreement in principle on key terms, the company believes a consensual and comprehensive restructuring is achievable.”