Digicel Group One Ltd, the telecommunications group’s Bermudian-based holding company, has gone into provisional liquidation in Bermuda.

The company has also filed for Chapter 15 recognition at US bankruptcy court in Manhattan.

However, Digicel said yesterday that the moves will not impact the regular operations of the company and are aimed at strengthening the company’s balance sheet.

A Digicel spokesman said: “It’s important to point out that this will have no impact on our day-to-day operations, our staff, our suppliers, our customers or any aspect of our ongoing activities ­— it is business as usual.”

Digicel, which is owned by Irishman Denis O’Brien, is going through a major restructuring of some of the approximately $7.4 billion of debt it carries in order that it can continue operating as a going concern.

Mike Morrison, Charles Thresh and James Bennett, of KPMG, were appointed joint provisional liquidators of Digicel Group One by the Supreme Court in Bermuda on April 29.

The petition for Chapter 15 recognition was lodged in US bankruptcy court for the Southern District of New York by the provisional liquidators.

Background details set out in the US court document shows that Digicel’s revenue for the year ended March 31, 2019, were approximately $2.3 billion, with an operating profit of approximately $479 million.

The petition states: “However, in recent years the group has seen significant reductions in voice revenues, which are largely due to the industrywide trend of voice services being substituted by data usage by mobile subscribers.

“The growth of data revenues and revenues from other related services, such as Digicel’s business solutions and cable television and broadband businesses, has not been sufficient to offset the decline in voice revenues.

“In addition, the expansion of Digicel’s business solutions and cable television and broadband businesses has required significant capital expenditures, which have reduced the group’s ability to generate operating free cashflow and reduce its finance costs.”

The petition adds that increased competitive pressures had negatively impacted business. “As a result, the group finds itself with unsustainable levels of indebtedness,” the petition states. “As described above, the group’s total outstanding debt was approximately $7.4 billion as of September 30, 2019, and the finance costs of the group have been steadily increasing.”

The petition states: “In the face of near-term maturities, increasing finance costs and widening losses, the group determined that there was a need for a comprehensive restructuring of its capital structure that would reduce aggregate liabilities, improve its liquidity profile and provide flexibility for the group to access further capital in the future to fund its businesses.”

A Digicel spokesman said the company had announced refinancing activities at the start of April, “which, when complete, will strengthen our balance sheet by reducing our debt, extending our maturities and reducing our ongoing financing costs”.

The spokesman added: “Following overwhelming support from our debtholders for these proposals, we are now progressing with the required administrative processes.

“As such, we announced details of a proposed Scheme of Arrangement in the Bermudian Courts in connection with Digicel Group One Ltd, which is purely an intermediate financing holding company.

“This scheme has the support of over 97 per cent of its bondholders and also involves the appointment of a light touch, joint provisional liquidators to oversee the implementation of the scheme.

The spokesman added: “We will provide further updates on this as we progress.”

The petition filed in the US court states that Bermuda is “not merely a letterbox jurisdiction” for Digicel and that the provisional liquidators have centralised the company’s restructuring activities on the island.

“As of September 30, 2019, Digicel occupied the No 1 position in the mobile telecommunications services market in Bermuda with over 50 per cent of the market share and it generated approximately $90.9 million in revenue from Bermuda operations for the year ended March 31, 2019,” the petition adds.

The court documents were reported on earlier by the OffshoreAlert website.

• Digicel operates in more than 30 markets in the Caribbean and South Pacific, as well as Bermuda