(CMR) Businessman Dennis O’Brien is poised to lose control of Caribbean-based Digicel in a new $1.8 billion plan to cut its debt as bondholders seek a large equity stake in compensation for a reduction in the amount they are owed.
The agreement 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 will see Mr. O’Brien becoming a minority shareholder in the business. However, Mr. O’Brien will remain one of Digicel's largest single shareholders and an actively involved director of the company.
Digicel, founded by Mr. O’Brien in 2001, has faced 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.
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.
However, in the last year, the company's largest market, Haiti, has been hit with unrest over the rising cost of living. This has impacted Digicel’s operations and reduced its earnings, leading to a profit warning late last year, RTE reported.
Digicel had to look at sustainable debt footing, which resulted in an agreement in principle with a group of bondholders that hold around 50% of the company’s debt.
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.
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