Digicel Owner Consumes Company Notes

Digicel Group Limited (DGL) owner Denis O’Brien allocated to himself 26% of his company’s cheaply priced $775m in 10.5% senior notes due 2018, the company says. The rest, plus cash on hand, was used to buy 100% of Digicel Pacific Limited (DPL) for $825m. O’Brien owns an 84% stake in DPL. “$200m of the $775m issuance will be purchased in a concurrent private placement with Mr O’Brien that will close simultaneously with the acquisition of DPL,” says Digicel. Digicel priced the 8-year NC4 bond at par to yield 10.50%, or T+715bp, through initial whispers of 10.75% area. Even after the tightening, buyers say the issue was cheap by 50bp-60bp. The bond was heard up 3pts Wednesday, confirming talk that it was generously priced for buyers. Investors say orders were scaled back significantly as the book soared above $6bn and O’Brien took the lion’s share. Despite the large oversubscription, the bond is rated Caa1/CCC+, implying a very high probability of default. The bond settles March 22 and the acquisition of DPL by Bermuda-incorporated DGL is expected to close April 1.