O’Brien set to lose control of Digicel after new debt deal

Businessman Denis O’Brien is on course to lose control of Caribbean-based mobile phone business, Digicel, following an overnight deal with bondholders to reduce the group’s debt pile.

The agreement in principle will see holders of around 50% of the entire capital of the business agree to a reduction in the company’s total debt of $1.8 billion through a debt for equity swap.

The result of the transaction, assuming it completes as planned, will be that Mr O’Brien will become a minority shareholder in the business, sources close to the deal have confirmed.

However, Mr O’Brien will remain one of Digicel’s largest single shareholders and an actively involved director of the business.

He has endorsed the proposal as a positive outcome for the recapitalised business, the company said in a statement.

Digicel, which was founded by Mr O’Brien in 2001, has been facing challenges with its substantial debt burden over recent years and has been actively trying to reduce it.

In 2020 it brokered a deal with debtholders for a plan to reduce the burden through a write-down of $1.7 billion of the firm’s then $7 billion debt.

While last July it completed the sale of its Pacific unit for $1.6 billion, using some of the proceeds of that to pay down debt.

Since then the company has been in active engagement with its key creditors over the debt issue.

Digicel, which was founded by Mr O’Brien in 2001, has been facing challenges with its substantial debt burden over recent years

The initial focus was on bonds worth $925m that were to fall due for repayment today, with a further chunk of debt falling due over the next 18 months.

However, in the last year the company’s largest market Haiti has been hit with unrest over the rising cost of living and this has impacted Digicel’s operations and reduced its earnings, leading to a profit warning late last year.

This led the parties to shift focus onto a wider deal that would place the company on a more sustainable debt footing.

Resulting from these talks, agreement in principle has now been reached with a group of bond holders that hold around 50% of the company’s debt.

In a statement, Digicel said it would “comprehensively addresses the company’s debt and ensures business continuity and uninterrupted service to customers.”

The plan remains subject to definitive documentation and other requirements.

As well as reducing the company’s outstanding $4.6 billion debt pile by $1.8 billion, the deal would also reduce annual cash interest by around $110m.

Last week, ratings agency Fitch downgraded Digicel’s credit rating and described the company’s borrowing levels as unsustainable with its operating performance affected by the macroeconomic weakness in Haiti. (rte.ie)