Denis O’Brien may lose up to 90% of Digicel to creditors

Businessman Denis O’Brien may end up losing as much as 90 per cent of his heavily-indebted Digicel telecoms group to bond creditors as they move to seize control of the business in return for writing off $1.8 billion (€1.7 billion) of its borrowings, according to sources.

Digicel said early on Wednesday that it had reached agreement in principle with investors in about half of its $4.55 billion of bonds and corporate loans on a proposal to cut its debt pile in exchange for creditors taking a stake in the group.

Sources said that Mr O’Brien, who owns 99.9 per cent of the group he founded in 2001, is on track to ultimately end up with a stake between 10 per cent and 20 per cent.

Final stakeholding

However, it would be in a recapitalised business that would have equity value, unlike its current situation where it is burdened by too much debt.

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The final stakeholding, which remains the subject of ongoing negotiations, would include shares awarded as an incentive for the Irish man to remain involved in the business and maintain key relationships across the 25 markets across the Caribbean and Central America in which Digicel operates, the sources said.

Digicel, the jewel in Mr O’Brien’s business empire that he set it up in Jamaica in 2001 after netting about €200 million from his sale of Esat Telecom to BT Group the previous year, has been through two major debt restructurings in a little over the past four years.

[ Denis O’Brien profile: high-flying career hits fresh turbulence ]

[ Digicel debt saga: a timeline ]

They were the result of Digicel building up a peak debt pile of more than $7 billion, mainly from selling bonds in the US high-interest junk bond market, as it spent billions building out mobile and other telecoms networks across its markets and funded payouts to Mr O’Brien.

The last debt overhaul, in 2020, resulted in bondholders writing off $1.6 billion of Digicel’s debt, knowing that they stood to lose way more if the company succumbed to liquidation at a time when the company’s earnings had been in decline for years.

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While Mr O’Brien injected $50 million — including cash and property — into Digicel as an incentive to get the last restructuring over the line, this time round bondholders are seeking a large equity stake in exchange for reducing the amount they are owed.

The latest talks came to a head after Digicel entered fresh restructuring talks last year with bondholders who were due to have $925 million repaid on Wednesday.

Ratings agency

The group only had $315 million of “stand-alone cash” on its balance sheet as of December, and had little chance of raising more money on the bond markets to refinance the debt, as interest rates soared globally over the past year.

Fitch, a leading credit ratings agency, had described Digicel’s debt as “unsustainable” as recently as last week, particularly as earnings in one of its key markets, Haiti, had fallen dramatically recently amid a fresh political, economic and humanitarian crisis in the country.

The group of bond investment firms that are poised to take control of Digicel include US-based PGIM, formerly Prudential Investment Management, GoldenTree Asset Management and Contrarian Capital Management.