Digicel plans to raise US$925m by selling bonds in a private placement.
The money will be used to repay an US$800m debt due in 2017.
A report in today's issue of the Irish Times newspaper says the fund raising will also give the company flexibility to pay a dividend to Digicel head Denis O’Brien.
Digicel Limited, the Bermuda-based entity raising the debt on behalf of the group, said it will use the cash to buy back the expensive senior loan notes, issued in 2009 with a coupon of 8.25%.
According to Bloomberg, US$800m of those notes were issued, leaving Digicel with a surplus of at least US$125m if it manages to buy back all of the debt it is targeting.
The company has in past bond offerings paid substantial dividends to Mr O’Brien and a handful of other minority shareholders from the proceeds.
Along with minority shareholders, Mr. O'Brien received a payout of about US$650m last year, and more than US$500m in the four previous years. The company told prospective debt investors some of the proceeds of the latest bond offering would be used for general corporate purposes, which would allow it to pay a dividend to Mr O’Brien, if the company chooses.
It could also retain the cash on its balance sheet to fund acquisitions.
On Tuesday ratings agency Moody’s assigned a B1, or so-called junk rating to the latest loan notes, which will be due for repayment by 2023.
Moody's says Digicel’s history of debt funded acquisitions and sizable dividend payments weigh down the rating.
It also highlighted concerns over Digicel’s reliance on the Jamaican market, which accounts for about 15 percent of Digicel’s US$2.8b annual revenues.
It said Jamaica is struggling to revive its economy and experiencing competitive telecom pricing.
In addition, slowing subscriber growth, lower pricing plans and adverse foreign currency movements relative to the US dollar in Jamaica, Haiti and Papua New Guinea, which account for more than 45 percent of revenue, resulted in flat earnings growth.
.jpg)
All feeds
