Amazing growth

In May 2006, Citigroup, acting as mandated lead arranger and sole bookrunner, closed a US$64mn transaction for Digicel Haiti to support its build-out of a GSM cellular telecommunications network in Haiti, costing US$128mn. Digicel is the leading cellular phone operator in the English-speaking Caribbean and has rolled out operations in 20 countries in five years, including Jamaica, Aruba, Barbados, St Vincent, St Lucia, Grenada, Cayman Islands, Trinidad and Tobago and Haiti.

This build-out project aimed for a capacity of 500,000 subscribers. The company’s 12-month subscriber target was achieved in less than two months however and by September, Digicel’s network capacity was constrained.

Therefore, by November, Citigroup was helping to raise a further US$70mn for the group – for an expansion of the project to cater for this rapid growth and achieve a second phase network capacity of 1.2mn.

“Due to record breaking demand, the project was more than doubled, thus resulting in additional financing needs in less than 12 months from the date of the first financing,” says Gladys Coupet, CCO, Citibank Haiti. “This successful financing quickly positions Digicel as a leader in wireless telecommunication services in Haiti.”

Citigroup managed to obtain new funding from existing lenders of more than double the initial commitments in less than two months. Combined, the two facilities are one of the largest private investments in Haiti’s history with 50% of the total project costs raised through a highly-structured non-recourse debt financing solution.

Given the political and economic challenges in Haiti and the significant development impact of the telecoms project in the country, approximately 90% of the total financing for both facilities was funded by development finance institutions Canada’s EDC, European Financing Partners (EFP), the Netherlands’s FMO, Société Financiere Haitienne de Developpement (Sofihdes) and France’s Proparco, as well as multilaterals such as the IFC.

The two facilities witnessed therefore a longer tenor and larger deal size than would be available in the commercial bank market. Both facilities run to seven years. Bank of Nova Scotia joined both facilities as a commercial lender.

Lenders benefit from offshore US dollar receivables, a contingent equity agreement and perfected security in all of the project’s assets, states Citibank, the only US bank with a presence in Haiti.

“The financing structure appropriately balanced Digicel’s need to segregate its project in Haiti from its other Caribbean businesses and the need to provide sufficient support to attract financing from international lenders,” adds Coupet. “Since its inception in 2001, Digicel has rolled out GSM and GPRS networks in 18 markets (including acquired operations), achieving continuous subscriber growth and consistently strong margins. The financing structure put in place by Citigroup in Haiti will allow the company to continue its aggressive growth targets in the region.

“The telecom sector is one of the most developed and dynamic sectors in the Haitian economy. The market outlook is positive, with an aggressive penetration of the market, supported by a large population (8.5mn) and the estimated 3mn Haitians living abroad who can now call their families in a number of remote areas where no access existed before. As a result, the risk profile for this sector is considered good. Haitian risk in general is improving with the election in 2006 of a democratically-elected government and good macroeconomic stability for the past three years.”


Deal information

Borrower: Unigestion Holding (Digicel Haiti)
Mandated lead arranger and bookrunner: Citigroup (US$10mn)
Lenders: Bank of Nova Scotia (US$9.75mn); FMO (US$27mn); EDC (US$22.5mn); Proparco (US$24mn); Sofihdes (US$0.75mn); IFC (US$30mn); EFP (US$10mn)
Law firms: Pillsbury Winthrop; Dais Polk & Wardell; Appleby; Lex Caribbean; Floissac Fleming & Associates; Fraser Milner Casgrain; Robert Laforest
Digicel I:
Amount: US$64mn
Tenor: 7 years
Date signed: May 2006
Digicel II:
Amount: US$70mn
Tenor: 7 years
Margin: 500bp over Libor
Date signed: November 2006