Dig­i­cel has moved to ad­dress its cred­it sit­u­a­tion af­ter launch­ing an of­fer­ing of US$1.55 bil­lion ag­gre­gate prin­ci­pal amount of se­nior se­cured notes due 2032 to be co-is­sued by Dig­i­cel In­ter­na­tion­al Fi­nance Lim­it­ed (DI­FL) and DI­FL US LLC.

The tele­coms com­pa­ny will al­so of­fer a US$415 mil­lion ag­gre­gate prin­ci­pal amount of se­nior un­se­cured notes due 2033 to be co-is­sued by Dig­i­cel Mid­Co Ltd, the in­di­rect par­ent of DI­FL, and DI­FL US II LLC.

Dig­i­cel said in a me­dia state­ment that this is re­lat­ed to DI­FL’s plan to en­ter in­to a new cred­it fa­cil­i­ty con­sist­ing of (i) new sev­en-year first lien se­nior se­cured term loans in an ag­gre­gate prin­ci­pal amount of US$750 mil­lion and (ii) a new five-year first lien se­nior se­cured re­volv­ing cred­it fa­cil­i­ty in an ag­gre­gate prin­ci­pal amount of US$200 mil­lion.

Ac­cord­ing to the re­lease, the DI­FL Se­cured Notes and the new DI­FL Cred­it Fa­cil­i­ties will be guar­an­teed by Dig­i­cel In­ter­me­di­ate Hold­ings Ltd, the di­rect par­ent com­pa­ny of DI­FL and a whol­ly owned di­rect sub­sidiary of DML, and cer­tain of DI­FL’s sub­sidiaries, and, sub­ject to cer­tain ex­cep­tions for ex­clud­ed as­sets and the “agreed se­cu­ri­ty prin­ci­ples”, will be se­cured on a first pri­or­i­ty ba­sis by liens on sub­stan­tial­ly all of the as­sets of DI­FL and the guar­an­tors, ex­cept that the New DI­FL Re­volver will have pay­ment pri­or­i­ty in re­spect of col­lat­er­al pro­ceeds in con­nec­tion with any ex­er­cise of or en­force­ment of reme­dies, dur­ing the oc­cur­rence and con­tin­u­ance of an event of de­fault, or from any dis­tri­b­u­tions re­ceived in an in­sol­ven­cy pro­ceed­ing.

The DML Un­se­cured Notes will be the oblig­a­tions of the is­suers on­ly and will not be guar­an­teed on their is­sue date.

Dig­i­cel in­tends to use the net pro­ceeds from the of­fer­ing of the Notes, to­geth­er with the ex­pect­ed pro­ceeds from the New DI­FL First Lien Term Loans and avail­able cash, to re­pay DI­FL’s ex­ist­ing cred­it fa­cil­i­ty, re­deem in full the out­stand­ing nine per cent Se­nior Se­cured First Lien Notes due 2027 co-is­sued by DIHL, DI­FL and DI­FL US LLC and the out­stand­ing 10.50 per cent Se­nior Notes due 2028 co-is­sued by DML and DI­FL US II LLC and pay fees and ex­pens­es in­curred in con­nec­tion there­with.

This an­nounce­ment came just two weeks af­ter Dig­i­cel an­nounced the clo­sure of two of its me­dia com­pa­nies: Loop News and Sports­max.

In 2023, the telecom­mu­ni­ca­tions com­pa­ny en­tered in­to a con­sen­su­al re­struc­tur­ing sup­port agree­ment sup­port­ed by near­ly all hold­ers of each tranche of DL’s and DI­FL’s fund­ed debt.

Dig­i­cel stat­ed the Notes have not been and will not be reg­is­tered un­der the US Se­cu­ri­ties Act of 1933, as amend­ed, and may not be of­fered or sold in the Unit­ed States ab­sent reg­is­tra­tion or an ap­plic­a­ble ex­emp­tion from reg­is­tra­tion re­quire­ments.

Dig­i­cel added in the no­tice that the an­nounce­ment did not con­sti­tute an of­fer to sell or the so­lic­i­ta­tion of an of­fer to buy the Notes, nor shall it con­sti­tute an of­fer, so­lic­i­ta­tion or sale in any ju­ris­dic­tion in which such of­fer, so­lic­i­ta­tion or sale is un­law­ful.

Dig­i­cel’s sub­stan­tial debt sit­u­a­tion can large­ly be traced to an ag­gres­sive, debt-fu­eled ex­pan­sion strat­e­gy across the Caribbean, Cen­tral Amer­i­ca, and the Pa­cif­ic re­gions since its found­ing in 2001.

To rapid­ly build out ex­ten­sive net­work in­fra­struc­ture and ac­quire mar­ket share, the com­pa­ny took on sig­nif­i­cant bor­row­ing.

This was com­pound­ed by fac­tors such as a de­cline in tra­di­tion­al voice call rev­enue as cus­tomers shift­ed to da­ta-dri­ven over-the-top (OTT) ser­vices, which erod­ed a ma­jor in­come stream.

Fur­ther­more, a com­plex cor­po­rate struc­ture and a sig­nif­i­cant por­tion of its debt be­ing de­nom­i­nat­ed in US dol­lars, while gen­er­at­ing rev­enue in var­i­ous lo­cal, of­ten weak­en­ing cur­ren­cies, cre­at­ed sub­stan­tial for­eign ex­change risks.

These pres­sures, com­bined with div­i­dend pay­outs to its prin­ci­pal share­hold­er, ul­ti­mate­ly led to a debt bur­den that be­came in­creas­ing­ly un­sus­tain­able, ne­ces­si­tat­ing mul­ti­ple re­struc­tur­ings, in­clud­ing re­cent debt-for-eq­ui­ty swaps where bond­hold­ers gained sig­nif­i­cant con­trol.