Digicel divests local tower sites to US company

Business reporter

Sunday, September 30, 2018

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Digicel Group Ltd has completed a sale and leaseback agreement with Phoenix Tower International LLC (PTI) through its Jamaican subsidiary, Phoenix Tower Jamaica Ltd.

The transaction, which runs roughly US$90 million, means PTI assumes ownership and management rights of 451 of Digicel's wireless communication tower sites in Jamaica.

The completion of the sale and leaseback agreement comes amid plans by the telecommunications company to refinance US$3 billion in debt as it seeks to reduce its overall leverage. It is understood that Digicel wants to reduce its debt from six times to five times its adjusted earnings, which hit US$1 billion in its last fiscal year.

Digicel already offloaded 215 wireless-communication towers in the French West Indies to the Florida-based Phoenix Tower International earlier this year and before that sold 202 towers in El Salvador in a deal estimated at the time to be worth anywhere between US$17 million and US$60 million.

“With similar agreements with PTI for sites in El Salvador and the French West Indies, this was the next natural step and we are delighted to be extending our partnership. This move is consistent with our stated intent to divest non-strategic assets and focus on building our business for the future,” Digicel Group CEO, Alex Matuschka reasoned.

Last month, Moody's ratings agency downgraded Digicel's outlook to stable following an announcement of an offer to exchange its outstanding 2020 and 2022 notes for new 2022 and 2024 bonds.

The rating agency said the exchange offer reflected the group's untenable capital structure and ongoing high leverage which stood at 6.7x gross debt-to-EBITDA at March 2018.

Additionally, Moody's reasoned that the company had a higher likelihood of future distressed exchanges, even considering the extended maturities that would result from the proposed exchange offer.

The rating agency 's downgrading also incorporated the view that an improvement in debt profile would be dependent not only on the completion of its asset sale programme and return to positive free cash flow, but also on the company's ability to refinance future maturities.

Digicel Group operates in more than 30 territories spanning the Caribbean, Central America and the Pacific Islands. The company's liquidity has been weakening for several quarters, with negative free cash flow resulting in a decline in the company's cash balance of US$158 million as at 30 June 2018. The US$90 million proceeds from the announced sale and leaseback, in addition to a reduction in capital spending, should help the company return to positive free cash flow by the end of fiscal year end March 2019.

“This latest transaction between PTI and Digicel deepens our excellent working relationship and strengthens PTI's position as the premier wireless infrastructure provider in the Caribbean. Jamaica is poised for significant wireless growth and data consumption in the years to come and PTI looks forward to helping our Jamaican customers, landlords, and the communities we operate in meet these growing demands successfully,” PTI CEO, Dagan Kasavana said.

Headquartered in Boca Raton, Florida, PTI owns and manages over 6,000 towers, 974 km of fibre and other wireless infrastructure and related sites throughout Costa Rica, Panama, El Salvador, Colombia, Peru, Mexico, the Dominican Republic, French West Indies, Jamaica, and the United States, including Puerto Rico and the US Virgin Islands.

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