Digicel Plans Bonds for Subsidiary Stake

Jamaica-based telecom Digicel is preparing to raise $600m in bonds to fund the purchase of a 72% stake in Digicel Pacific Limited, according to investors and sell-side analyst reports. No definite timeframe has been heard specified for the transaction, though it is expected within the next few weeks if market conditions permit. The bond would most likely be issued at the Digicel Group Limited level, according to a report from Barclays, which expects a 10-year tenor. The shop says the market likely did not expect the transaction so soon after last year’s purchase of 43% of a Central American unit. “While operations have performed very well, allowing the company to successfully deleverage, Digicel has taken various opportunities to quickly re-leverage,” says Barclays. “As such, we believe the company will likely have to pay at least a 25bp concession, and the news could continue to weigh on bond prices in the near term,” it adds. Digicel communicated its intentions to buy a majority stake in Digicel Pacific last month, according to a note sent to bondholders at the time. DPL is 84% owned by Digicel’s majority shareholder and chairman Denis O’Brien, and 16% by third-party investors and management. It operates in 6 Pacific island markets. It is not know if mandates have been awarded, though, Credit Suisse arranged a “non-deal” investor lunch last week in New York for Digicel. The telecom raised $500m in 8.25% of 2017 NC4 bonds in a November sale managed by Citi, Credit Suisse and JPMorgan.