DIGICEL’s proposed debt restructuring plan could face hurdles with some of its creditors reportedly not in agreement with the deal that was reached late last month.

Digicel on February 28, just a day ahead of when it was due to pay US$925 million in bonds, said it had reached an agreement with “an ad hoc group of crossover holders, holding approximately 50 per cent of the company’s debt” about a debt restructuring.

However, a report in the London-based Sunday Times newspaper, pointing to information coming out of Reorg, a credit intelligence firm, shows that Digicel is yet to win support from a key group of creditors.

“Two classes of creditors have signed a co-operation agreement to present a ‘united front’ against an agreement in principle signed by [Digicel Chairman Denis] O’Brien and a third class of creditors,” the Times report noted, quoting from Reorg.

The report also pointed out that holders of 57 per cent of term loans issued by Digicel International Finance Limited (DIFL) and 46 per cent of the DIFL secured note holders are not supportive of the agreement.

“The bloc could leave Digicel Limited creditors, who struck the deal with O’Brien, Digicel’s largest shareholder, short of the votes needed to push the planned reorganisation through a pre-pack chapter 11 or similar consensual-type restructuring. It is understood that the DIFL creditor group is looking for a higher coupon or interest rate on its debt. Discussions are said to be ongoing,” the report claimed.

With only a narrow majority of creditors signed up to the restructuring proposal, and a total of eight different classes of bond and debt investors with the company’s capital stack, an agreement by the end of this month looks an ambitious target.

Under the agreement, O’Brien who now owns 99.9 per cent of Digicel could see his stake dwindling to 10 per cent. However, it was noted that if the the restructuring deal collapse, or if creditors push for a more punitive outcome, O’Brien’s stake could wither even further.

The Times quoted a source saying there will be conflict if there is a perception that “some stakeholders are benefiting more than others”.

It added that Reorg reports that aside from retaining a stake in the business and warrants over stock, O’Brien has also negotiated a future share of proceeds from the sale of Digicel Pacific.

Telstra last year agreed to buy Digicel Pacific, paying US$1.6 billion (€1.5 billion) upfront with a US$250 million earn-out. The first US$50 million of the earn-out has been paid. Aside from the remaining US$200 million earn-out, there is also US$100 million in escrow pending arbitration on a tax dispute between Digicel and the Papua New Guinea treasury.

Documents suggest that O’Brien’s share of the Digicel Pacific proceeds would be modest and likely to be in low single-digit millions.

Having twice managed to strike a deal with bondholders, it was a case of third time unlucky. O’Brien’s stake, once valued at close to US$2 billion at the time of a planned stock market flotation in 2015, may be worth at best US$80 million to US$135 million.