Digicel’s flagship store on Tortola. Background details set out in the US court document shows that Digicel’s revenue (for all operations) for the year ended March 31, 2019, were approximately $2.3 billion, with an operating profit of approximately $479 million. Photo: VINO/File

Digicel, which is owned by Irishman Denis O’Brien, is going through a major restructuring of some of the approximately $7.4 billion of debt it carries in order that it can continue operating as a going concern. Photo: The Irish Times

Digicel Group One Ltd, the telecommunications group’s Bermudian-based holding company, has gone into provisional liquidation in Bermuda. Photo: Caribbean360

The company has also filed for Chapter 15 recognition at US bankruptcy court in Manhattan.

‘Business as usual’

The Digicel Group says; however, the decision to liquidate one of its affiliates will not affect day to day operations.

"It is business as usual,” said a Digicel spokesperson in a statement on Monday, May 18, 2020.

Digicel said that when complete, the deal would strengthen its balance sheet by reducing debt, extending its maturities and reducing its ongoing financing costs.

Only bondholders will be affected

The telecommunications giant disclosed details of a proposed Scheme of Arrangement in the Bermudian Courts in connection with Digicel Group One Limited.

The parent company describes the subsidiary as a purely intermediate financing holding company. 

The liquidation of the affiliate affects bondholders.

The Digicel Group said this scheme has the support of over 97 per cent of its bondholders and also involves the appointment of a “light touch" joint provisional liquidator to oversee the implementation of the scheme.

"It’s important to point out that this will have no impact on our day to day operations, our staff, our suppliers, our customers or any aspect of our ongoing activities," said a Digicel spokesperson in the statement.

Digicel also announced that it will extend the offer to bondholders until Wednesday, May 20, 2020, as part of steps to slash its outstanding debt by US$1.6 billion and set up a new company to hold debt assets in Bermuda.

The refinancing of its debt remains a critical component for the company’s future.

Debt reduction

Digicel Group and related affiliates aim to reduce its outstanding debt by approximately US$1.6 billion to US$5.4 billion.

Digicel, which is owned by Irishman Denis O’Brien, is going through a major restructuring of some of the approximately $7.4 billion of debt it carries in order that it can continue operating as a going concern.

Mike Morrison, Charles Thresh and James Bennett, of KPMG, were appointed joint provisional liquidators of Digicel Group One by the Supreme Court in Bermuda on April 29, 2020.

The petition for Chapter 15 recognition was lodged in US bankruptcy court for the Southern District of New York by the provisional liquidators.

Background details set out in the US court document shows that Digicel’s revenue for the year ended March 31, 2019, were approximately $2.3 billion, with an operating profit of approximately $479 million.

Petition: Voice revenues took a hit

The petition states: “However, in recent years the group has seen significant reductions in voice revenues, which are largely due to the industrywide trend of voice services being substituted by data usage by mobile subscribers.

“The growth of data revenues and revenues from other related services, such as Digicel’s business solutions and cable television and broadband businesses, has not been sufficient to offset the decline in voice revenues.

“In addition, the expansion of Digicel’s business solutions and cable television and broadband businesses has required significant capital expenditures, which have reduced the group’s ability to generate operating free cashflow and reduce its finance costs.”

The petition adds that increased competitive pressures had negatively impacted business. “As a result, the group finds itself with unsustainable levels of indebtedness,” the petition states. “As described above, the group’s total outstanding debt was approximately $7.4 billion as of September 30, 2019, and the finance costs of the group have been steadily increasing.”

The petition states: “In the face of near-term maturities, increasing finance costs and widening losses, the group determined that there was a need for a comprehensive restructuring of its capital structure that would reduce aggregate liabilities, improve its liquidity profile and provide flexibility for the group to access further capital in the future to fund its businesses.”