Digicel request for bond repayment delay rejected

A push by Ireland’s richest man to refinance his heavily indebted Caribbean telecoms company has hit a wall after big investors rejected his bid to postpone repaying $3bn in bonds.

Denis O’Brien’s effort to buy more time for Digicel to repay the debt comes at a critical time for the company, amid anxiety about a possible default on a $2bn bond due in 2020.

Now bondholders have dismissed Mr O’Brien’s proposal to extend by two years this debt and a $1bn 2022 note, saying the terms he has offered were “unacceptable”.

A statement from a bondholder committee suggests it will take a robust approach to talks with Mr O’Brien, who took Digicel into 31 markets after founding the company in Jamaica in 2001.

Digicel’s bondholders are known to include Ashmore, BlackRock and Eaton Vance but their precise stance is unknown and it is not clear whether they are represented on the committee.

Mr O’Brien faces the prospect of having to sweeten the terms of a restructuring proposal that has led to downgrades from rating agencies Moody’s and Fitch.

The company has been a lucrative investment for Mr O’Brien but its bonds have been trading at 60 cents and 70 cents on the dollar, as concern mounts about its indebtedness at a time of anxiety over risks to emerging markets more generally.

Revenues and earnings have declined and Digicel has cut tariffs for data to boost the slow uptake of services introduced after a $2.4bn investment in networks.

Law firm Akin Gump, which is advising the bondholder committee, said investors holding more than 60 per cent of each bond have “entered into a lock-up agreement” in which they resolved not to tender their notes in response to Mr O’Brien’s proposal to prolong the debt.

In response, Digicel said that it was extending by three weeks the early tender deadline for the offer until October 19.

This move, days before the Friday deadline for acceptance of the offer, was the second extension. “Digicel continues constructive discussions with an ad hoc group of noteholders regarding the exchange offers,” the company said.

Without naming any Digicel investors, Akin Gump said it has held two teleconferences for multiple financial institutions who together hold $2.8bn of bonds issued by the company.

“Based on the strong feedback received from Digicel Group Ltd noteholders, Akin Gump has informed Digicel Group Ltd and its advisers that the current terms of the proposal set out in the offering memorandum are unacceptable to . . . noteholders,” it said.

The committee has directed Akin Gump to communicate a request to other bondholders to refuse to tender their notes “and thereby further increase the already sizeable majority of Digicel Group Ltd noteholders” who oppose it.