Latin America Loan: Digicel's US$1.355bn multi-tranche loan

IFR Review of the Year 2017
3 min read
Paul Kilby

B here now

Debt-laden Digicel got some vital breathing space in 2017 and opened up a whole new market for itself with a US$1.355bn financing that included a rare Term Loan B.

In the biggest-ever Term Loan B seen in emerging markets, the Caribbean and Central American mobile telephony operator shifted a good chunk of its debt from the covenant-heavy bank market to the less-restrictive institutional market in one fell swoop.

With the intention of refinancing a US$856m in loans at holding company DIFL, leads launched a Term Loan A among relationship banks but also tested the waters for a Term Loan B.

Latin America hadn’t seen a Term loan B since 2006, when Chilean communications company VTR, a unit of Liberty Global, issued such a structure as part of its refinancing.

“We went to an entirely new market which hadn’t been accessed before out of Latin America except for [VTR],” said Blake Haider, a managing director at Citigroup, the lead-left on the transaction. “This was an entirely new source of capital.”

Typically the domain of US-centric buyers, the Term Loan B market had historically been ignored by LatAm names with no US ownership. But by adding a US co-obligor on the trade, Digicel quickly solved this problem.

“A lot of the money in CLOs is prescribed to be invested in certain securities, within a US jurisdiction,” said Chris Gilfond, head of Latin America capital markets origination at Citigroup.

“We engineered this [so that] suddenly it was in scope for many of these US-centric buyers.”

Thanks to strong demand, the company upsized the Term Loan B to US$955m from US$635m, using the incremental funds to redeem 7% 2020 notes.

In the end, the senior secured Term Loan B came with a spread of Libor plus 375bp, some 25bp inside initial talk. The deal included six months of soft call protection at 101 and amortises at 1% per year with quarterly payments.

The company also raised US$100m through a three-year revolver, and US$300m with a five-year secured Term Loan A.

All this was good news for the highly leveraged credit, eliminating any sizeable debt maturities until 2021 and leaving the bond market cheering.

“During the course of the transaction the capital structure rallied more than 400bp,” Haider said.

Citigroup was sole lead on the revolver and senior secured Term Loan A, joint MLA with JP Morgan on the Term Loan B and joint books with Barclays, Credit Suisse and Deutsche Bank.

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