Denis O'Brien's Digicel Group moved on Friday to ease the burden of its debt pile, asking holders of $3 billion (€2.5 billion) of bonds to switch into longer-term notes.
Digicel is offering to exchange $2 billion of bonds that are due to be repaid in September 2020 for newly-issued bonds that mature in 2022, which would carry the same coupon or interest rate of 8.25 per cent, the company said in a statement.
In addition, the phone group, which operates across the Caribbean and South Pacific regions, is offering to exchange $1 billion of bonds that are set to mature in 2022 for higher-cost securities that would not stand to be redeemed until 2024.
Bondholders that take up the offer by 5pm New York time on September 14th will be offer 100 per cent of what they are owed, including a 5 per cent “early tender premium”. Those that subscribe before the final cut-off point on September 28th stand to receive 95 per cent.
The 2020 bonds, which had been trading as low as 66.7c on the dollar during the week, soared as much as 8.7c on Friday to 77.4c as investors gave an initial welcome to the plan, which may ease near-term refinancing risks at the group as it seeks to rebuild its earnings and lower the burden of its total $6.7 billion of borrowings.
Risk concerns
Fitch, one of the world's leading ratings agencies, had downgraded its stance on Digicel's creditworthiness last weekend amid concerns about risks to the group's ability to refinance debt that falls due in the next five years, unless its improves its debt ratios and delivers "sustainable" free cash flows.
Digicel, which reported to its creditors on Wednesday that its earnings dropped 2 per cent in the quarter to the end of June, gave an update on its planned asset sales on the investor call the following day.
The company expects to generate $90 million from a previously-announced disposal of 450 towards across the Caribbean by the end of September. Digicel executives also said that the company is on track to raise a further $55 million from the sale of a South Pacific towers portfolio by the end of December.
The group plans to raise a total of up to $500 million from asset sales by next April.
Digicel said that its bond-exchange offer is conditional on 90 per cent of holders of the debt securities tendering their notes. However, market observers said that it is likely the group will lower this threshold, if necessary.
