Denis O'Brien's Digicel has abandoned plans to get holders of $925 million ($842 million) of bonds due for repayment in 2023 to take some pain in the group's debt restructuring plan, after fewer than 8 per cent of these high-ranking creditors signed up take part in the deal.
The phone group had planned at the start of April to get five categories of bondholders to write off $1.7 billion of its $7-billion-plus debt pile when it unveiled a restructuring plan as its borrowings became unsustainable after years of losses.
However, it scaled back this ambition by the end of the month to $1.6 billion, sweetening its offer to the 2023 bondholders to ask them largely just to push out when they were due to be paid back by two years. Only 7.2 per cent of these creditors, who enjoy greater protections than most of the other bonds subject to the distressed debt plan, had agreed to take part as of Monday.
Digicel said in a statement on Thursday that it was terminating its offer to holders of the 2023 bonds.
Holders of the other four categories of bond targeted in the restructuring have overwhelmingly accepted plans for large write-offs, knowing they would stand to recover much less in the event that companies within the group succumbed to an insolvent liquidation. The deleveraging plan is expected to be completed by the middle of next month.
Filings submitted by Digicel units to the US Securities and Exchange Commission (SEC) late last week show that the group, which has operations in 32 countries across the Caribbean, Asia Pacific and Central America, made a combined net loss of almost $700 million in the 3½ years to last September.
The debt restructuring, involving bondholders accepting securities of a lesser value, represented a “superior” outcome for creditors to other options considered, including an insolvent liquidation, according to the documents.
Scope of feasibility
“The scope of feasibility of these options has been limited as a result of confidence in the company being undermined due to successive years of net losses and recent unprecedented market turbulence occurring as result of the Covid-19 pandemic, the duration of which remains unclear,” they stated.
The complicated deal involves a new company called Digicel Group 0.5 Limited being set up near the top of its corporate tree to ultimately own group assets across the Caribbean, Asia Pacific and Central American regions – and the orderly winding-up of two other holding companies.
The first of these, Digicel Group One Limited (DGL1), which currently holds the assets across the three regions, had provisional liquidators appointed in Bermuda at the end of April and, in a procedural move, filed for Chapter 15 bankruptcy recognition in the US courts in recent days.
The SEC filings show that KPMG Ireland, which was appointed to value the assets of DGL1 as talks with bondholders were under way in recent months, concluded that a fire sale of its assets would only raise between $484.7 million and $629.3 million. This would only have led to a partial recovery for senior unsecured creditors over three years as DGL1's unsecured bondholders faced wipeout.
