DENIS O’BRIEN has come up shy in his attempt to raise $435 million (€344 million) for his Digicel mobile phone operations in the Caribbean and Central America.
Digicel confirmed yesterday that it had secured $335 million from investors in recent days – leaving it $100 million shy of its original target.
The failure to raise the full amount can be attributed to the global financial crisis, which has made it extremely difficult for companies to raise funds, particularly those with a large debt burden. Digicel will have debts of about $3.2 billion as a result of this fundraising.
Digicel declined to comment on the fundraising.
It is not clear what implications the shortfall will have for the mobile phone business or for Mr O’Brien, who was expected to pocket about $260 million from the exercise.
Citigroup, Credit Suisse and JP Morgan managed the fundraising exercise for Digicel Ltd, a Bermuda-based business wholly owned by Mr O’Brien.
The five-year senior notes are due to mature in 2014 and are thought to carry a coupon of 12 per cent.
It emerged last week that Digicel planned to raise $435 million through a private placement of bonds. The money was raised by Digicel Ltd, which owns the company’s Caribbean operations, covering 24 markets.
A total of $260 million of the money was to be used to acquire a 40 per cent equity interest in Digicel Holdings (Central America) Ltd (DHCAL), which runs its new businesses in Honduras and Panama.
This is a sister business of the Caribbean operation and is also owned by Mr O’Brien.
He was expected to net the $260 million from the sale of this equity.
The balance of the funds – $175 million – was to be used for “general corporate purposes” by the Caribbean operation.
It is not clear what the split will be between the two businesses now that Digicel has raised a smaller amount.
Founded in 2001 by Mr O’Brien, Digicel had about 7.1 million subscribers at the end of 2008.
It has operations in the Caribbean, Central America and the Pacific Islands.
The company recently cut its workforce by 10 per cent, in a move that cost it approximately $3 million.
For the 12 months to the end of last December, Fitch said Digicel achieved consolidated revenues of $1.7 billion and earnings before interest, tax, depreciation and amortisation of $661 million.
Ratings agency Fitch last week said it expected Digicel’s business to stabilise in the coming years.
“Fitch expects capital expenditures to decline and stabilise over the next few years, resulting in positive free cash flow, which should be used to pay debt maturities as they amortise,” the agency said.
