Is the Digicel debt saga nearly over?

Is the Digicel debt saga nearly over?

The ongoing Digicel debt saga has seen an agreement between Denis O’Brien, the founder of the group, which is active as a mobile operator across Caribbean and Central America, and bond investors that will see the businessman lose most of his stake in the telecoms group in exchange for a US$1.7 billion debt write-off.

The restructuring support agreement will also see O’Brien retain a board seat, though the Irish Times newspaper cites sources that suggest his stake will ultimately fall to 10 per cent.

Much of the deal was foreshadowed a few months ago when, as we reported at the time, creditors moved to seize control of the business in return for its writing off a reported US$1.8 billion of its borrowings (now confirmed as US$1.7 billion).

Digicel chief executive Oliver Coughlan has been quoted as saying that the fundamentals of the business remain strong, that the debt restructuring will conclude later this year and that “it will continue to be business as usual during the implementation phase”.

The restructuring deal will see holders of almost $1.18 billion of bonds convert their investment into an initial 62 per cent stake, eventually rising to 90 per cent, according to the Irish Times, as what it calls the ‘bondholders-turned-equity-participants’ take part in a $110 million rights issue and further backstop agreement.

A number of bond investment firms are now expected to take control of Digicel. Other interested parties may see part of their investment being written down or payback dates extended.

The path to this point has been a rocky one. Digicel launched in Jamaica in 2001 and expanded rapidly throughout the Caribbean, Central America and the Asia-Pacific region. Debt was an issue by 2014, an IPO was abandoned in 2015 and bondholders accept delayed repayments on $3 billion of bonds in 2019 as an alternative to the prospect of a company liquidation.

Digicel carried out an earlier debt restructuring in 2020, when investors agreed to write off $1.6 billion of Digicel’s then $7 billion debt. After this, the sale of the Papua New Guinea unit may have been positive news but economic disruption in Haiti hit earnings in a key market. The latest debt-cutting plan was announced in March this year.