Two units of business Denis O'Brien's Digicel plan to sell as much as $550 million (€487 million) of senior secured bonds to refinance existing borrowings and give the telecommunications group additional financial flexibility.
Digicel Holdings (Bermuda) Ltd and Digicel International Finance Ltd (DIFL) aim to sell the notes by way of private placement with investors, the company said on Tuesday.
The two units plan to use the net proceeds from the bond offering to repay funds already drawn down on DIFL’s existing revolving credit facility as well as a so-called term loan A facility.
It is understood that the group will have about $150 million left over, which will be used for general corporate purposes, including a possible transfer of money to companies further up the Digicel group.
Repaying the money drawn down on the revolving credit line would reset the facility, allowing the group to draw down up to $100 million. Revolving credit facilities are like bank overdrafts.
DIFL has secured the approval of its creditors to give it additional financial headroom, by allowing the Digicel unit to have borrowings of up to five times its earnings before interest, tax, depreciation and amortisation (Ebitda), compare to 4.5, previously.
The latest financial manoeuvring comes less than a week after top Digicel executives faced questions from analysts on a conference call on the rate at which the group’s cash position dropped late last year.
Digicel revealed last Wednesday to its bondholders, as it reported quarterly results, that its cash levels fell by almost two-thirds to $96 million in the three months to the end of December.
Executives told analysts the folloing day that this was mainly the result of investing in working capital during the seasonally busy period before Christmas, and a tax payment made following the $90 million sale of telecom towers in the Caribbean in September.
However, it is understood the company indicated that it expects cash to grow by the end of its financial year on March 31st, excluding any proceeds from potential asset sales.
