Digicel files for bankruptcy $7.4bn in ‘unsustainable’ debt

Digicel files for bankruptcy with $7.4bn in ‘unsustainable’ debts

21 May 2020 | Alan Burkitt-Gray

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Digicel, the Caribbean and Pacific mobile operator, has filed for bankruptcy, saying it has “unsustainable levels of indebtedness”.

According to filings in New York, it has US$7.4 billion in outstanding debt, with revenues for the year ending March 2020 just $2.3 billion and operating profit only $479 million. KPMG has been appointed provisional liquidators.

The company is largely owned by Denis O’Brien, the Irish businessman who made a fortune by building Ireland’s first competitive mobile operator, Esat Digifone, which he sold to BT and later became O2 Ireland.

Digicel has already made an earlier attempt to restructure its operations, but now it has told the Securities and Exchange Commission (SEC), the US financial regulator that it now wants to offer its Pacific business as security to creditors, worth $941 million, in a debt restructuring.

The group was not listed, having abandoned an attempt to float shares in 2015, but because it had issued bonds in the US it has to report its finances to the SEC.

According to its filings it made a combined net loss of almost $700 million in the three and a half years to September 2019. An analysis in the Irish Times says that KPMG has calculated that “a firesale of its assets” would raise $484 million to $629 million.

The group has businesses in Papua New Guinea and five other island nations in the Pacific: Fiji, Nauru, Samoa, Tonga and Vanuatu, with 2.5 million customers between them.

But its main focus is the Caribbean and central America  (see map), where its businesses range from French Guiana on the South American mainland, to Jamaica in the Caribbean, to El Salvador on the east coast of Central America.

The move means further uncertainty in Latin America and Central America, where Telefónica is hoping to offload most of its South American businesses, except in Brazil, and has sold three in Central America to Millicom, though failed to sell one

Earlier the Australian Financial Review reported that China Mobile has offered $900 million for the Pacific islands operations. China Mobile denied the report.

Digicel needs court approval in Bermuda, where it is registered, for the offer to put up the Pacific business as security. If approved, the deal will go into effect on 15 June.

The CEO of the Digicel group is Jean-Yves Charlier, who took up the role in January 2019 after a difficult time at Veon, the former VimpelCom.

Two years ago Digicel raised $90 million in an effort to reduce debt, by selling its Jamaican towers to Phoenix Tower International, which had already bought 417 of its towers in El Salvador and Francophone countries in the West Indies.