Bondholders in Denis O’Brien’s Digicel seek reassurance after rough ride

irishtimes.com | April 13, 2018

For bondholders in Irish billionaire Denis O’Brien’s mobile empire, it has been a roller coaster few months. Now, they’re looking for reassurance that the rough ride is almost over.

Within the next month, Digicel Group executives will brief investors worldwide, introducing them to its new management and beginning to lay the ground for an eventual $2 billion (€1.6 billion) refinancing of a bond maturing in 2020, according to a person familiar with the matter. The so-called “non-deal roadshow” comes after the 2020 yield rose as high as 15.4 per cent from 8.5 per cent – making it the worst emerging markets performer this year.

“What needs to happen is for the company to come out now with something positive,” said Till Moewes, an analyst at Schroder Investment Management, which holds a share of the debt. “They need to produce some new positive news to stop this negative chain reaction.”

Digicel has a history of refinancing early, and some investors might have hoped the company would move to redeem the 2020 bond this year. While no final decision has been taken, that probably won’t happen any time soon should yields remain close to their current level, even after a recent dip, according to the person familiar, who asked not to be identified as deliberations are continuing.

O’Brien built his mobile empire, which stretches from Haiti to Papua New Guinea, on high-risk, high-yield debt. Since 2001, Digicel has accumulated about $6.5 billion of borrowings, mostly to build out networks across 31 regions. More than two years after the company shelved a planned share sale in New York that was in part designed to pay down debt, and with recent earnings disappointing investors, bondholders want a positive catalyst. Digicel faces a $1.3 billion maturity in 2021, as well as the 2020 payment.

“We expect Digicel to address that with anticipation,” said Marie Fischer-Sabatie, an analyst at Moody’s Investors Service. “If the company doesn’t make material progress in 2018 and does not start to address the issue by the middle of this year, then we could start to see some pressure on ratings.”

Widening spread
The extra yield, or spread, over Treasuries investors demand on Digicel’s 2020 bonds has widened by 358 basis points, or 3.58 percentage points this year, while emerging-market bond spreads widened 13 basis points. The drop in its bonds pushed the spread above 1,000 basis points, or 10 percentage points.

Meanwhile, momentum at Digicel has stalled. Underlying revenue in its fiscal third-quarter dropped about 3 per cent from the year-earlier period to about $580 million, according to a source. Adjusted earnings before interest, taxes, depreciation and amortization were about $246 million, down around 3 percent.

A number of issues were at play, according to the source. Among these were delays in signing some corporate contracts, new incentives to drive data use which hurt short-term earnings and persistent weakness in Papua New Guinea’s economy, a key market for the company.

Digicel, which declined to comment for this article, faces no immediate pressure, as its next big bond maturity is over two years away and it has pushed out its timetable to reduce borrowings, which amount to about 6.5 times earnings.

Progress is needed, said Moody’s Fischer-Sabatie, who described Digicel’s debt level as “high” for its B2 rating. O’Brien laid out plans last year to dismiss 1,500 workers, and appointed Alexander Matuschka as chief executive.

“We still anticipate that Digicel will see some growth in Ebitda over the next 12 to 18 months, in particular because the company will see the benefits of its transformation programme,” said Fischer-Sabatie. “So we expect a gradual reduction in leverage.” – Bloomberg

Papua New Guinea: Highlands Earthquake Situation Report No. 7 (as of 13 April 2018)

reliefweb.int | April 13, 2018

This report is produced by the National Disaster Centre and the Office of the Resident Coordinator in collaboration with humanitarian partners. It was issued by the Disaster Management Team Secretariat, and covers the period from 5 to 11 April 2018. The next report will be issued on or around 19 April 2018.

Background

270 000 people are in need of assistance across four provinces of Papua New Guinea’s highlands.

11, 041 households (55,205 people) remain displaced in nine care centres.

91 per cent of health facilities are open, but almost 55 per cent have no water.

15,726 students in 105 schools assessed as partially or completely damaged have had their access to education affected by the earthquake.

Humanitarian operations in and around Tari, provincial capital of Hela province, remain suspended since 28 March, but inter-communal tensions reportedly abated during the reporting period.

194 aftershocks have occurred since the initial 26 February earthquake, of which six were of a 6.0 or greater magnitude.

270,000 people in need of assistance

$62M funding required

10,000 callers listened to messages containing lifesaving information per cent of health centres open metric tons of relief items transported

Situation Overview

On 26 February 2018, a 7.5 magnitude earthquake hit the Highlands Region of Papua New Guinea (PNG), affecting an estimated 544,000 people in five provinces – Enga, Gulf, Hela, Southern Highlands and Western provinces, with Hela and Southern Highlands the most affected. More than 270,000 people, including 125,000 children, have been left in immediate need of life-saving assistance. Since the initial 26 February earthquake, 194 aftershocks have occurred, of which six were of a 6.0 or greater magnitude.

The latest tracking figures available from the Displacement Tracking Matrix (DTM) implemented as part of the Shelter Cluster response, indicate that 11,041 households (approximately 55,205 people) remain displaced due to the earthquake, of which 1,250 households remain in nine care centres while 9,879 households remain within their communities.

The Shelter Cluster has proposed to adopt common definitions of settlement types defining a care centre as a displacement site where people are hosted away from their community or area of origin, and affected community as a community where people are still living within their community, even if displaced locally from their damaged/destroyed home. Two shelter response options and recommended packages have been proposed for cluster members’ endorsement corresponding to the two target groups defined above: (1) IDP household ShelterNFI return kit (for those in care centres); and (2) community reconstruction toolkit (for affected communities).

More than 90 per cent of health facilities in Hela and Southern Highlands (79 of 86) are now open and functional, but 13 of these health facilities sustained severe structural damage that continues to pose serious occupational threats to all users. Refurbishment of earthquake related structural damages remains a challenge. In particular, 55 per cent of health facilities urgently need access to safe water sources.
Traditional water sources were destroyed by earthquake-induced landslides and landslips. Water quality testing is already underway. The continual lack of access to safe drinking water significantly increases risks of waterborne diseases outbreak among affected and displaced persons. There have been sporadic reports of increasing cases of diarrheal diseases and gastrointestinal infections at health facilities in Hela and SHP due to consumption of contaminated surface water.

Since 28 March, humanitarian programmes in and around Tari, the provincial capital of Hela province, have been suspended due to increased tension and inter-communal fighting. Many partners have temporarily relocated humanitarian staff to other locations, including to the Southern Highlands provincial capital, Mendi, in view of the situation. Humanitarian partners aim to resume relief work as soon as the security situation allows. In the past week, the situation appears to be stabilizing in and around Tari, with ongoing efforts to negotiate an end to the inter-communal violence deployed by national authorities.

On 9 April, a joint team of UNICEF and Provincial Department of Education staff returning from distribution of Safe Temporary Learning Space (STLS) materials in Nipa/Kutubu district encountered a roadblock in Nipa town, manned by a group of armed men and boys. One UNICEF staff member sustained a minor injury due a rock thrown and breaking the window of his vehicle. Provincial and district officials, as well as local community representatives, have publicly apologized for the incident, and committed to ensure the safety of humanitarian staff and operations in the province. UN humanitarian operations are ongoing in Southern Highlands province.

UPDATE 2-ExxonMobil resumes quake-hit PNG LNG production ahead of schedule

uk.reuters.com
April 13, 2018

* Resumption of output, exports comes weeks ahead of expectations

* Announcement expected to drag on spot Asia LNG prices near term (Adds comment, detail, prices)

MELBOURNE April 13 (Reuters) - ExxonMobil Corp has resumed production at the Papua New Guinea liquefied natural gas (LNG) project a fortnight ahead of schedule after it was shut down in the wake of a deadly earthquake in February, its Australian partners said on Friday.
Production at the PNG LNG project was halted after a 7.5 magnitude earthquake hit Papua New Guinea’s energy-rich interior on Feb. 26, causing landslides, damaging buildings and killing 100 people.
Australia’s Oil Search Ltd and Santos Ltd said they had been advised that one train at the LNG plant near Port Moresby has re-started operations and the second train is expected to resume as gas production ramps up.
LNG exports, which were expected to resume shortly, will come weeks ahead of schedule and may put pressure on spot LNG prices, traders said. Exxon Mobil Corp had earlier advised that production would restart in May 2018.
“The recommencement of operations at the PNG LNG Project, ahead of ExxonMobil’s previously guided eight week timeframe, is a major achievement by the operator,” said Oil Search Managing Director Peter Botten.
Exxon Mobil was able to restart production earlier than expected because damage to hundreds of kilometres of pipelines that run through the mountains between gas output facilities and the LNG terminal was much less than initially feared, a source involved with the project told Reuters.
Santos is a foundation partner and holds a 13.5 percent interest in PNG LNG. Oil Search has a 29 percent stake.
Exxon Mobil declared force majeure on exports from PNG in March and the resulting uncertainty over supply drained liquidity from Asia’s spot LNG markets, traders said.
“At the time the project was halted in late February, it was a time in the year when LNG prices were to gradually fall down as demand eases,” said one industry source in Tokyo.
“The halt did have some impact in that it took longer for (Asian benchmark) prices to fall, but the impact was rather limited because demand was weak at the time,” he said.
Asian spot LNG prices LNG-AS have lost almost 70 percent from their 2014 peak to around $7 per million British thermal units (mmBtu), driven lower by a global supply overhang that developed as new production came online, especially in Australia and the United States.
Worry about the surplus has been tempered somewhat by unexpectedly strong demand out of China, India and Southeast Asia, especially over this past winter.
Before the quake, the PNG LNG project had been producing at around 20 percent above its rated capacity of 6.9 million tonnes a year.
Another trader said that although the announcement would likely weigh on prices, any fall “will be limited by summer demand expected soon from Asia.”

Papua New Guinea: armed gangs attack and rob aid workers

theguardian.com
April 13, 2018

Papua New Guinea
Red Cross and Unicef staff members assaulted amid rising frustrations about level of humanitarian aid following earthquake

Red Cross and Unicef staff have been attacked while assisting after the Papua New Guinea earthquake. Photograph: Francis R. Malasig/EPA

Staff from two aid agencies have been attacked in the last week in Papua New Guinea as violence and tribal conflict hampers the efforts of relief organisations assisting in earthquake recovery.
A team of local aid workers with the PNG Red Cross was robbed and assaulted by armed assailants in Tari.
According to police and incident reports seen by the Guardian, the group of eight people, including five PNG Red Cross staff members, was robbed by five people armed with shotguns and machetes last Friday.
 They had been traveling to Tari, through Hela province, an area which has seen an escalation in violence in recent weeks.
The assailants – who appeared agitated and would not listen to explanations of the Red Cross’s role – allegedly assaulted them and robbed them of clothing and possessions.
One man was hit with a machete.
The following day a team of Unicef workers was attacked in the Southern Highlands province, with at least one person believed to have sustained injuries.
 The team had been driving back to the town of Mendi, said Unicef representative in PNG, David Mcloughlin.
“Our convoy of cars ... was attacked.
The worst affected in the attack was a government security escort car.
One Unicef staff, a medical doctor, received minor head and shoulder injuries from rocks thrown at the car and with the remaining staff all made it back safely to Mendi traumatised but physical unhurt.
“The injured staff member requiring stitches to their head was treated at a hospital in Mendi.
The government and community leaders have apologised to Unicef for the attack.
“We want to reiterate that Unicef appreciates very much the excellent cooperation and support from national and provincial government.
" We know the marauders do not represent the PNG people who have been kind, helpful and grateful for our assistance.”
Mcloughlin said after the violence began staff were transferred staff to a safe location in Mendi on 29 March.
 “Although tension in Tari has hindered our humanitarian response, we want to reaffirm that Unicef continues to remain present in the highlands region to provide assistance to needy children.
 "Our team remains in Mendi, despite the car attack, and we are operating from there.
"For Tari, we are currently reassessing the situation very closely and ready to resume relief work as soon as the security situation allows,” he said.
“The situation is unpredictable and volatile.
"Security remains a big concern and is affecting our aid delivery.
"However, Unicef will remain in the highlands region and is committed to providing clean water, hygiene education, vaccination and malnutrition treatment and psycho-social support to children affected by the earthquakes.”
Aid workers have said there is a rising sense of frustration among Highlands residents in some areas, about the level of humanitarian assistance reaching them after the earthquake seven weeks ago – and several subsequent tremors – killed more than 150 people.
More than 20,000 people are estimated to be living in informal relief centres and many affected areas remain cut off by road.
More than 140,000 people from the largely subsistence-living population are considered to be food insecure because of the mass destruction of gardens and crops.
The Highlands region is frequently beset by tribal conflicts which have worsened in intensity, and the increasingly indiscriminate targeting of victims.
 A proliferation of high powered weaponry has left the already resourced-starved police force unable to respond in many cases.
Tari hospital and airport have been closed because of recent fighting during which a number of people were murdered and houses torched.
Last week the UN pulled 12 non-essential staff members from Tari in response to the unstable security situation.
Mark Kessler, head of mission for the International Committee of the Red Cross (ICRC) in PNG said they have not pulled back from their outreach work, but there were growing frustrations and not every NGO had the same in-country recognition and experience as the Red Cross and ICRC.
Kessler said the frustrations were justified in some cases but not necessarily in others.
“The actors, whoever they are, have to be transparent on the services they can provide and when they’ll provide them,” he said.
“If they can’t provide services everyone has to be honest with the population and tell them why.
“There should [also] be a certain degree of patience, understanding and respect at all times towards humanitarian actors and government actors who are doing their best to respond in a complex environment.”

ExxonMobil resumes Liquefied Natural Gas production in Papua New Guinea

THURSDAY, APRIL 12, 2018 

*Production safely restarts ahead of schedule at the PNG LNG plant near Port Moresby

*Production to increase in the coming weeks; LNG cargo deliveries to commence soon

*Company continues to assist with humanitarian relief efforts 

IRVING, Texas – ExxonMobil said today that production of liquefied natural gas (LNG) has safely resumed at the PNG LNG project in Papua New Guinea following a temporary shutdown of operations after a severe earthquake occurred in the region on Feb. 26. LNG exports are expected to resume soon.

One train is currently operating at the LNG plant near Port Moresby. The plant’s second train is expected to restart as production is increased over time.

During the period that production was shut-in, ExxonMobil was able to complete unrelated maintenance scheduled for later in the year to allow for more efficient operations in the months ahead.

“Resuming LNG production ahead of our projected eight-week timeframe is a significant achievement for ExxonMobil, our joint-venture partners and our customers,” said Neil W. Duffin, president of ExxonMobil Production Company. “We will continue to support those communities impacted by the earthquake as we work toward fully restoring our operations. We hope our contributions and assistance will provide comfort to those in need.”

ExxonMobil is supporting multiple local and international relief agencies involved in the humanitarian response to the earthquake.

In addition to the company’s previously announced $1 million contribution for humanitarian relief, ExxonMobil crews have donated and delivered more than 37 tons of food, 14 tonnes of drinking water, 600 tarpaulins used as emergency shelters, 1,000 solar lights for households, 20 larger solar lighting units for institutions, as well as other essential supplies including water purification tablets, cooking aids and hygiene kits.

The company is also assisting with the restoration of health care facilities and community food gardens, and is providing resources to help the government address the significant task of restoring roads in the Highlands region.

“While a lot of work remains to be done, we are confident that with the support of all our partners and stakeholders, we can help our friends and neighbors recover from this tragic natural disaster,” said Andrew Barry, managing director of ExxonMobil PNG.

About ExxonMobil in Papua New Guinea

ExxonMobil has had a presence in Papua New Guinea since the 1920s and currently has a workforce of 2,600 in the country, 80 percent of whom are Papua New Guineans. The company operates the PNG LNG project, an integrated development that includes natural gas production and processing facilities, onshore and offshore pipelines, and liquefaction facilities. Production and processing facilities are located in the Southern Highlands, Hela, Western, Gulf and Central provinces of Papua New Guinea. The company also has interests in oil production and fuels marketing.

World Bank raises East Asia's 2018 GDP outlook, but wary of trade war

reuters.com | March 27, 2018

JAKARTA (Reuters) - The World Bank raised its growth forecast for East Asia and the Pacific for 2018, but warned that a possible U.S.-China trade war could harm growth in countries that are part of the Chinese goods supply chain.

The Washington-based lender said in a report on Thursday it expected 2018 growth in the developing East Asia and Pacific (EAP) region, which includes China, to expand 6.3 percent, a notch up from 6.2 percent forecast in October.

The 2018 forecast is slower than last year’s 6.6 percent growth, reflecting a slowdown in China as it continues to rebalance its economy away from investment towards domestic consumption, with policies that focus more on slowing credit expansion and improving the quality of growth, the bank said.

China’s 2017 growth was a faster-than-anticipated 6.9 percent, prompting the World Bank to revise up this year’s growth projection to 6.5 percent from October’s forecast of 6.4 percent.

Sudhir Shetty, the World Bank’s chief economist for the region, said the forecast did not take into account a potential trade war between the world’s two largest economies, although he did not feel that one was imminent.

Some U.S. officials and analysts have said they believe the dispute could eventually be resolved via dialogue, but Beijing reiterated on Thursday that no formal talks have taken place.

However, Shetty noted that two thirds of Chinese goods on a U.S. list targeted for increased tariffs are made in a supply chain that stretches across the region, particularly in the Philippines, Malaysia and Vietnam.

Should the tariffs be imposed on goods assembled in China, there would be “a knock-on effect” to economies in the supply chain, Shetty told a news conference.

“That is a significant thing to be concerned about because the success of this region is based on open trade,” he added.

The World Bank suggested bolstering regional trade through mechanisms such as the ASEAN Economic Community, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the China-led Regional Comprehensive Economic Partnership so that the region can try to insulate itself against the threat of a trade war.

“Will that completely offset the impact of a possible trade war? Probably not, but it could certainly mitigate against the worst effects of those developments,” Shetty said.

The pace of interest rate increases in advanced economies is another short-term risk for the region, Shetty said.

Interest rates in most economies in the EAP region are currently at historically low levels and monetary tightening may be needed to help offset capital outflows should rates in advanced economies rise faster than expected, he said.

This was particularly the case for countries with high debt levels or rapid credit growth, such as Malaysia, he said.

Meanwhile, countries such as Papua New Guinea, Laos and Myanmar may have to increase their fiscal buffers through a conservative fiscal stance and better public debt management, he said.

The World Bank expects the region to grow 6.1 percent in 2019, unchanged from its prior forecast, and 6 percent in 2020.

Uncertainties delaying economic recovery in the Pacific

adb.org | April 11, 2018

SYDNEY, AUSTRALIA (11 April 2018) — Growth in the Pacific is expected to remain weak in 2018, as economic and political uncertainties, fiscal challenges, and natural disasters hold back some of the region’s larger economies. The outlook projects a slow recovery, with growth picking up only in 2019, says a new Asian Development Bank (ADB) report launched today.

Expected recovery in Papua New Guinea and strong growth in Timor-Leste should contribute to Pacific regional growth picking up to 3.0% in 2019.

The Asian Development Outlook (ADO) 2018, ADB’s flagship annual economic publication, projects that Pacific economies will, on average, grow 2.2% in 2018—the same rate as last year. However, expected recovery in Papua New Guinea (PNG) and strong growth in Timor-Leste should contribute to regional growth picking up to 3.0% in 2019.

“Several Pacific countries face heightened economic uncertainty and the impacts of extreme weather events and disasters, highlighting the need to build resilience across the region,” said Carmela Locsin, Director General of ADB’s Pacific Department. “Climate-proofing infrastructure, maintaining fiscal buffers, and investing in education to expand economic opportunities are all vital for more resilient economies in the Pacific.”

PNG—the Pacific’s largest economy—was adversely affected by a major earthquake in late February this year, which will hold back growth in oil and gas production, and slow economic growth to 1.8%. However, the Asia-Pacific Economic Cooperation meetings in 2018 is expected to provide economic stimulus. The ADB report says the medium-term outlook for PNG remains positive with GDP growth likely to reach 2.7% in 2019.

After a steep growth slowdown in Fiji in the wake of Cyclone Winston in 2016, reconstruction spending, improved agricultural output, and tourism growth spurred recovery. With most cyclone reconstruction ending soon, economic growth is expected to decelerate slightly from 3.9% in 2017 to 3.6% in 2018 and 3.3% in 2019—with tourism, construction, and agriculture likely to be the main contributors.

In Timor-Leste, the economy contracted in 2017 as political uncertainty held back public spending and private investment. The 3.0% and 5.5% projected growth rates for 2018 and 2019, respectively, hinge on a solid public expenditure program after the election of a new government expected in May. A new treaty with Australia to pave way for the development of the Greater Sunrise oil field will boost the growth outlook in the long term. The report says renewed emphasis on skills development and a supportive approach to labor migration would give young people better access to employment.

Slower growth in Solomon Islands is expected in 2018 and 2019 as new construction will only partly offset a likely further decline in logging. Progress is being made in implementing a national transport plan, but challenges remain.

Growth will moderate in Vanuatu in 2018 and 2019, due to the completion of several large infrastructure projects. Vanuatu’s ambitious infrastructure pipeline is supporting its current and future prospects, but a rise in public debt poses challenges for fiscal management.

The economic outlook for the North Pacific economies is mixed, with tourism expected to recover in Palau, but capacity constraints could limit infrastructure investment-driven growth in the Federated States of Micronesia and Marshall Islands. The report notes that improving education can equip a young labor force with better skills to fill domestic employment over the long term.

Moderate growth in the South Pacific economies of Cook Islands, Samoa, and Tonga is seen this year and the next. Damage caused by Cyclone Gita which hit Tonga in February 2018 is projected to push the economy into a slight contraction. Growth in Samoa will fall sharply this year as one of the country’s biggest employers—a manufacturing plant—closes operations. The Cook Islands’ economy is expected to expand by 3.5% in 2018, supported by tourism.

Economic prospects for the small island economies of Kiribati, Nauru, and Tuvalu are weakening. Growth is projected to decelerate slightly in Kiribati and Tuvalu, but more significantly in Nauru due to the winding down of the Regional Processing Centre for asylum seekers. Public investments financed by development partners are expected to drive economic growth in these countries throughout 2018 and 2019.

ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members—48 from the region.