DENIS O’Brien, the Irish businessman who founded telco Digicel in 2001, could lose up to 90 per cent of the entity to US-based investment firms who are moving to seize control of the business in exchange for writing off up to US$1.8 billion of its debt.

The firms set to take control are Golden Tree Asset Management, PGIM Fixed Income and Contrarian Capital Management. They have already reached an agreement in principle with Digicel about the move, which is aimed to cut the telco’s US$4.55-billion debt pile.

Digicel did not say how much of its shares O’Brien would have to cede in the debt-for-equity agreement. However, in its release late Tuesday it said, “Mr O’Brien would remain actively involved in the business as a director and retain an equity interest in the recapitalised business”, raising eyebrows that he would have to give up a majority of the business.

The Jamaica Observer reached out to Pat Walsh, who was listed as the person for media queries, about the agreement for greater clarity about how much of the company O’Brien would own after the transaction is complete, but he only responded, “As discussions are ongoing, I can’t comment beyond what is included in the statement.”

O’Brien now owns about 99.9 per cent of Digicel.

However, a source familiar with the deal but who was not authorised to speak publicly told the Caribbean Business Report that post-transaction, bondholders would become significant majority owners of the recapitalised business and that O’Brien would remain one of its largest individual shareholders.

A deal to cut Digicel’s debt by US$1.8 billion would equate to about 40 per cent of the company’s US$4.55-billion outstanding bonds. It’s also worth noting that convertible notes worth US$190 million handed out to some investors as part of the 2020 debt restructuring can technically be swapped by bondholders for a 46 per cent stake in the company from June. It is expected that this will also form part of the negotiations.

The execution of both transactions could see O’Brien ceding 86 per cent of Digicel to the US-based funds. Meanwhile, the restructuring, which needs the support of a larger group of creditors to become effective, would reduce annual cash interest by US$110 million “while ensuring sufficient cash to fund operations and invest in key growth areas”, according to Digicel’s statement Tuesday.

The plan follows two debt restructurings at Digicel in the past four years, with the latest, in 2020, resulting in bondholders writing off US$1.6 billion of the group’s then US$7-billion debt, knowing that they stood to lose way more if the company succumbed to liquidation at the time.

Haiti’s impact on Digicel’s debt

Although Digicel had at first only sought to extend the repayment date for the March 2023 bonds, a “deteriorating and unprecedented situation in Haiti since September 2022 led the company to shift its focus to a more holistic solution for the company’s capital structure”.

Holders of the bonds that were due on Wednesday agreed last week to give Digicel a 30-day grace period to allow for debt restructuring talks to continue.

Digicel sought an initial public offering in New York in 2015, the proceeds of which were to be used to pay off the debt, but it was cancelled with the company citing certain conditions. After that O’Brien managed to push out some maturities in 2018, restructured the debt 2020 and agreed to sell Pacific operations a year later. Some of the monies from that sale went to reducing the debt to its current level.

The company, however, continued to struggle amid weak macroeconomic conditions, specifically in Haiti, eventually forcing him to hand over control to creditors.

O’Brien extracted about US$1.9 billion of dividends from Digicel from 2007 to 2015.