A DUBLIN-BASED company controlled by Denis O’Brien is to earn $7.5 million (€5.8 million) in adviser fees from the $1.5 billion bond offering by Digicel Group Ltd, the Caribbean and Pacific islands mobile phone group owned by the wealthy Irish entrepreneur.
The fees will be paid to Island Capital Services Ltd, which has an “advisory services and monitoring agreement” with Digicel, according to a 269-page document on the bond offering seen by The Irish Times.
The document also details other multimillion dollar payments by Digicel to companies controlled by Mr O’Brien.
It shows that $44.4 million in fees was paid by Digicel to Island Capital, Communicorp, Ican and AC Executive Aviation Services Ltd over a three-year period to the end of March 2012.
An additional $2.1 million was paid to Island Capital and Communicorp to reimburse them for expenses incurred for legal and professional fees, and travel and accommodation costs.
In the document, Digicel effectively acknowledges that it has not obtained a third-party “fairness” opinion as to whether these transactions with Mr O’Brien’s companies represent good value for the company. “Therefore, while we believe them to be, they may not have been on or have terms as favourable to us as we could have obtained from unaffiliated third-parties in arms-length transactions,” Digicel states in the bond document.
These payments are separate to Mr O’Brien’s remuneration as Digicel’s chairman and the dividends he receives from the mobile phone group as its 94 per cent shareholder.
Mr O’Brien received a “regular” dividend payment of $10 million and a “special” dividend of $300 million from Digicel in the three months to the end of June 2012 – the first quarter of its financial year.
Digicel paid $3.8 million in salaries and “other short-term benefits” last year to Mr O’Brien, vice chairman and co-founder Leslie Buckley and six non-executive directors.
The document states that Island Capital is paid an annual management fee of $500,000 by Digicel, which is also “obligated” to pay 0.5 per cent of the aggregate transaction value of any “tender offers, acquisition, sales, mergers, financings, exchange offers, recapitalisation or similar transactions” undertaken by the mobile phone group.
Between April 1st, 2009, and March 31st, 2012, Island Capital was paid $26.4 million by Digicel.
Island Capital’s chief executive David Sykes is a non-executive director of Digicel.
This is one of a number of arrangements in place between Digicel and companies controlled by Mr O’Brien.
The document shows Digicel paid $15 million over the past three years to rent aircraft from AC Executive Aviation Services Ltd, which is controlled by Mr O’Brien. Digicel has agreed to purchase an “agreed number of flight hours” each month from this company.
Digicel pays a monthly service fee of $53,000 to Communicorp, a media company controlled by Mr O’Brien, with radio licences in Ireland and elsewhere.
This covers the provision of office space, printing and telecoms services to Digicel, which is based in the Caribbean.
This cost Digicel $1.97 million over three years up to the end of March 2012.
Meanwhile, Ican Ltd, a subsidiary of Communicorp, was paid $1.06 million over the three years to develop and build a number of intranet and internet sites.
Digicel provides mobile services in 30 markets and had 13 million subscribers by the middle of this year.
In the three months to the end of June – the first quarter of its financial year – Digicel increased its revenues by 11 per cent year-on-year to $674 million.
Its Ebitda (earnings before interest, tax, depreciation and amortisation) amounted to $282.3 million compared with $253.6 million a year earlier.Digicel is selling $1.5 billion worth of bonds to refinance other debts.
