A group of American bondholders are now the majority owners of Digicel!  But what does that mean for you and your money, and your service?

So, Digicel owes this group of bondholders BILLIONS of US dollars.  And for the past few years, they’ve been struggling to pay up.

So now, the American bondholders are taking majority ownership of one of the largest and most well-known brands in the Caribbean and Central America.  As part of a new debt restructuring deal, the bondholders now own 62% of Digicel.  They’ll also have the option to up their stake to 90% through a rights issue.

Meanwhile, Digicel founder Dennis O’Brien, who owned 99% of the company, will see his stake dwindle to just 10%. Ouch!

So how did we get here?  Digicel was founded in 2001, and very quickly became the dominant player in the Caribbean and Central America, operating in 25 countries.

But O’Brien borrowed massively to fund this rapid expansion.  Who did he borrow from?  A large chunk of the money came from three American investment firms:  PGIM, Golden Tree Asset Management and Contrarian Capital Management.  By 2020, Digicel owed a massive US$7 billion.

Around that time, Digicel started having trouble repaying these bondholders.  In 2020, the company filed for US Chapter 15 bankruptcy in Bermuda. This allowed the US courts and foreign courts to cooperate.  That same year, the bondholders agreed to write off US$1.6 billion of Digicel’s debt.  

After that, the company sold its operation in Papua New Guinea, and things seemed like they were turning around. But then, their operations in Haiti went downhill when Haiti’s President was assassinated in 2021.  Plus the global economy took a nose dive because of the pandemic, rising inflation and interest rates, so that was another hit.

So, Digicel pretty much ended up right back where it started – owing billions of dollars to bondholders. 

Cut to July 2023 – right now – and Digicel has another debt restructuring deal.  They reportedly agreed to give up an initial 62% stake in the company to bondholders, in exchange for writing off one point seven billion US dollars of debt. I’ve seen reports that their debt is now somewhere around four to five billion US dollars.

Bondholders could increase their stake to 90%, as they will be allowed to participate in a US$110 million rights issue. But that depends on the outcome of the bankruptcy filing in Bermuda.

The agreement will also see O’Brien’s stake in Digicel fall to just 10%. But, he’ll still have a seat on the company’s board.

Despite all this, Digicel execs say that the company’s fundamentals are still good and it’s business as usual until the deal is finalised.