Denis O'Brien yesterday signalled he will try again to float his Caribbean mobile company, Digicel, "within a year" after earlier yanking its proposed listing in New York at the eleventh hour.
The billionaire, who was seeking to raise up to $2 billion for acquisitons and debt paydown, said the market volatility he blamed for the decision would “settle down within three to six months”.
“We will come back to the market in time when market conditions are right,” he told CNBC television. His spokesman did not respond to a request from the Irish Times for further clarity.
Analysts, meanwhile speculated the pulled flotation may cause concern to investors in Digicel's $6.5 billion debt pile. Steve Malcolm, a telecoms analyst with Arete in London, said it would make them "nervous".
“The IPO price ($13 to $16 a share) was pretty rich for the economic environment we find ourselves in. I would have thought the chairman retaining 94 per cent voting control was [ALSO]a sticking point,” he said.
According to Bloomberg, most Digicel bonds fell in the wake of Mr O’Brien’s decision. A $1 billion debt maturing in April 2022 fell 3.8 per cent to 83 cents on the dollar in early trading, the biggest drop since last year.
That security, whose biggest holders include Doubleline Capital and Investec Asset Management, has lost 11 per cent so far this year. The yield has risen to 9.89 per cent from 6.37 per cent a year ago.
"Bond investors had reservations that an IPO would be successful, especially in current market conditions," Michael Chakardjian, an analyst at CreditSights in London, told Bloomberg. "Obviously an IPO would have been a positive event for bondholders."
David Holohan, head of research at Merrion Capital, said the company's limited options for reducing debt could weigh on Digicel's growth prospects.
Mr O’Brien however insisted it has adequate funding to implement its business plan to pivot from mobile services into fixed-line and cable television. About $400 million from the proposed flotation was earmarked for this purpose.
In an indication that its competitors will not let it have its own way, however, Cable & Wirless, Digicel's biggest rival in many markets, announced it has snapped up the Caribbean rights to the English Premier League football. Digicel's Sportsmax holds broadcast rights until the end of this season.
Mr O’Brien, meanwhile, said while it was “very difficult to predict the future” regarding when market conditions might be more amenable to a flotation, he thinks the volatility may flatten out by next spring.
“The markets will be fine then. You won’t need to offer as big a discount and people will hit their IPO ranges,” he said.
Digicel flotation range of between $13 and $16 a share would have given it an enterprise value of about $10 billion, including its debts.
Mr O’Brien had been hoping to raise at least $1.7 billion by releasing about 40 per cent of its equity, although he would have retained 94 per cent control.
He confirmed to CNBC that investors were not willing to pay the price per share he had been seeking. He was apparently unwilling to offload a majority stake in order to raise the funds targeted.
“We didn’t hit our price targets. The discount people are looking for [in emerging market investments] is very high” he said.
Notwithstanding the general market volatility, there were also concerns raised among market commentators regarding the debt levels and the extent of control that Mr O’Brien would have retained over Digicel.
The billionaire, who founded Digicel in Jamaica in 2001, maintained that despite its level of debt, Digicel is “very comfortable”.
(Additional reporting: Bloomberg)
