Irish billionaire Denis O’Brien wants All of Digicel
Denis O’Brien plans to grab a 40 per cent stake in Digicel Holdings (Central America) Limited (DHCAL) that will essentially give him total ownership of the entity and which will make all operations under the brand wholly owned by him. O’Brien. already fully owns Digicel’s Caribbean and Pacific operations.
On Monday, Digicel Limited, a Bermuda-incorporated company owned by O’Brien, announced its intention to float a US$435 million note, of which US$260 million would be used to acquire a 40 per cent stake in DHCAL.
Last May, the World Bank’s International Finance Corporation in its disclosure on a proposed investment in a US$400-million project to build and operate a greenfield mobile cellular telephone network in Honduras – that was implemented by Digicel Honduras SA de CV (Digicel Honduras), a company wholly owned by DHCAL – stated that O’Brien owned a majority stake in DHCAL.
O’Brien already fully owns Digicel’s Caribbean and Pacific operations.
The Irishman had in the past raised funds through debt to buy back shares in Digicel’s Jamaican operations, making him sole owner.
In 2007, O’Brien had raised $1.4 billion through an issue by Digicel Group Limited as part of an ownership-restructuring plan. He used the proceeds from the bond issue to buy out 100 per cent of Digicel Limited’s common equity and placed the shares under Digicel Group Limited.
The Digicel store in New Kingston when it was being refurbished.
Fitch Ratings gave the latest note being issued by Digicel a favourable rating. The note would become due in 2014.
“Digicel’s ratings are supported by a historically strong operating performance, its position as the leading provider of wireless services in the Caribbean (including strong market positions in Jamaica, Haiti and Trinidad & Tobago), strong brand recognition, and an increasingly diversified revenue and cash flow stream across the Caribbean,” said Fitch’s report. “The ratings also incorporates lower capital expenditure requirements over the next few years and management initiatives of cost controls in the face of the global economic environment.”
Going forward Fitch expects capital expenditures to decline and stabilise over the next few years, resulting in positive free cash flow which should be used to pay debt maturities as they amortise.
Digicel’s total debt has grown rapidly in the past few years as a result of acquisitions, necessary funding for the rapid build out of new markets and the 2007 US$1.4 billion recapitalisation.
“Proforma the new issuance and considering debt as of December 31, 2008, total consolidated debt at DGL should approximate to US$3.3 billion,” said the Fitch report.
Digicel also mitigates currency risk by generating most – 66 per cent – of its revenues in US dollars, Euros or pegged to these currencies.
For the 12 months ended December 31, 2008, Digicel’s consolidated revenues and earnings before interest, tax, depreciation and amortisation were approximately US$1,735 million and US$661 million, respectively, and total subscribers amounted to approximately 7.1 million.
Digicel operates in 24 markets in the Caribbean including Jamaica, St Lucia, St Vincent, Aruba, Grenada, Barbados, Cayman, Curacao, Martinique, Guadeloupe, Trinidad & Tobago and Haiti among others, as well as El Salvador.
Digicel’s operating assets are owned by operating subsidiaries of DIFL, which in turn is a subsidiary controlled by DL. DL is a wholly owned subsidiary of DGL, an entity owned by O’Brien. In addition to Digicel, O’Brien owns Digicel Central America and Digicel South Pacific.
At the end of the transaction, DL will own 40 per cent in DHCAL along with O’Brien’s majority stake in the entity.
