Digicel has moved to address its credit situation after launching an offering of US$1.55 billion aggregate principal amount of senior secured notes due 2032 to be co-issued by Digicel International Finance Limited (DIFL) and DIFL US LLC.
The telecoms company will also offer a US$415 million aggregate principal amount of senior unsecured notes due 2033 to be co-issued by Digicel MidCo Ltd, the indirect parent of DIFL, and DIFL US II LLC.
Digicel said in a media statement that this is related to DIFL’s plan to enter into a new credit facility consisting of (i) new seven-year first lien senior secured term loans in an aggregate principal amount of US$750 million and (ii) a new five-year first lien senior secured revolving credit facility in an aggregate principal amount of US$200 million.
According to the release, the DIFL Secured Notes and the new DIFL Credit Facilities will be guaranteed by Digicel Intermediate Holdings Ltd, the direct parent company of DIFL and a wholly owned direct subsidiary of DML, and certain of DIFL’s subsidiaries, and, subject to certain exceptions for excluded assets and the “agreed security principles”, will be secured on a first priority basis by liens on substantially all of the assets of DIFL and the guarantors, except that the New DIFL Revolver will have payment priority in respect of collateral proceeds in connection with any exercise of or enforcement of remedies, during the occurrence and continuance of an event of default, or from any distributions received in an insolvency proceeding.
The DML Unsecured Notes will be the obligations of the issuers only and will not be guaranteed on their issue date.
Digicel intends to use the net proceeds from the offering of the Notes, together with the expected proceeds from the New DIFL First Lien Term Loans and available cash, to repay DIFL’s existing credit facility, redeem in full the outstanding nine per cent Senior Secured First Lien Notes due 2027 co-issued by DIHL, DIFL and DIFL US LLC and the outstanding 10.50 per cent Senior Notes due 2028 co-issued by DML and DIFL US II LLC and pay fees and expenses incurred in connection therewith.
This announcement came just two weeks after Digicel announced the closure of two of its media companies: Loop News and Sportsmax.
In 2023, the telecommunications company entered into a consensual restructuring support agreement supported by nearly all holders of each tranche of DL’s and DIFL’s funded debt.
Digicel stated the Notes have not been and will not be registered under the US Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.
Digicel added in the notice that the announcement did not constitute an offer to sell or the solicitation of an offer to buy the Notes, nor shall it constitute an offer, solicitation or sale in any jurisdiction in which such offer, solicitation or sale is unlawful.
Digicel’s substantial debt situation can largely be traced to an aggressive, debt-fueled expansion strategy across the Caribbean, Central America, and the Pacific regions since its founding in 2001.
To rapidly build out extensive network infrastructure and acquire market share, the company took on significant borrowing.
This was compounded by factors such as a decline in traditional voice call revenue as customers shifted to data-driven over-the-top (OTT) services, which eroded a major income stream.
Furthermore, a complex corporate structure and a significant portion of its debt being denominated in US dollars, while generating revenue in various local, often weakening currencies, created substantial foreign exchange risks.
These pressures, combined with dividend payouts to its principal shareholder, ultimately led to a debt burden that became increasingly unsustainable, necessitating multiple restructurings, including recent debt-for-equity swaps where bondholders gained significant control.