Digicel evaluating refinancing options

Digicel evaluating refinancing options

Observer business writer

Wednesday, December 04, 2019

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Regional telecommunications giant, Digicel is currently evaluating its refinancing options over part of its debt pile, which currently stands at around US$7 billion (€6.35bn).

In a statement issued on the weekend in Ireland, the Jamaican-based company confirmed that it is evaluating its refinancing options amid mounting debts and falling revenues.

The statement follows questions from The Sunday Independent in Ireland regarding a credit downgrade from internationally renowned rating agency, Fitch.

Ireland is the home base of Digicel's founder and Chairman Denis O'Brien.

Fitch reported that the rating downgrade was related to Digicel's “unsustainable capital structure” and an imminent refinancing risk on US$1.3 billion worth of bonds due in April 2021.

Fitch said it expects that Digicel will have to restructure debt at multiple levels in the next 12-18 months, due to the group's unsustainable capital structure and imminent refinancing risk, raising concerns about Digicel's ability to finance its huge debt of US$7 billion.

Fitch indicated that this would be difficult, given what many analysts see as lacklustre operating performances in the past quarter.

However, The Sunday Independent quoted a spokesman for Digicel on the weekend saying the company's operational initiatives to stabilise and grow its mobile business are now delivering tangible, positive results in local markets, and this week it reaffirmed its guidance for a continuation of this trend for the financial year 2020.

According to the spokesman, “on an investor call this week, Digicel told investors its leverage ratio is starting to come down, and it is currently evaluating its refinancing options and will not be commenting until that evaluation has concluded”.

Sul Ahmad, a primary analyst for Fitch, told The Sunday Independent that Digicel could struggle to refinance some of the bonds. He said this could trigger default or insolvency proceedings at some of the other levels.

Digicel saw its earnings marginally fall to US$249 million for the second quarter. According to Bloomberg, Digicel's debt levels now stand at 6.9 times earnings before interest, tax, depreciation and amortisation (EBITDA). This is a move in the right direction, coming from a level of 7.3.

Digicel saw a nine per cent uptick in cash flow derived from operating activities as it continues to reap rewards from its data business. The revenues from this division have now surpassed that of its once core business, voice on mobile handsets.

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