Digicel, the Irish-owned telecom giant, expects to raise US$925 million (J$106.4 b) in senior notes in order to redeem a previous issue, stated US-based rating agency Fitch.

Its the latest proposed bond issue from the company with operations in the Caribbean and Pacific seeking to finance its increased capital spend.

Fitch expects Digicel Ltd, a subsidiary of the group, to issue the “proposed US$925 million senior notes due 2023”. The proceeds are expected to “fully redeem its US$800 million 8.25 per cent senior notes due 2017 and to pay for a tender premium for such redemption, as well as the associated accrued interest”, stated Fitch in an online document this week.

Fitch reasoned that the new debt would not negatively affect the company as it continues to generate a sufficient cash balance at some half-a-billion dollars.

“Fitch expects the company’s financial leverage to remain stable over the medium term given its high cash balance. Despite forecasted negative free cash flow and some pending investments, its cash balance of US$512 million at December 2014 should cover any shortfall from cash flow from operations without a significant need for external financing. Therefore, Fitch does not foresee any material increase in the company’s gross debt level, which was US$6.4 billion at December 2014,” stated Fitch.

Digicel continues to invest in network expansion and its tower-building project in Myanmar (Burma). This resulted in Fitch forecasting annual capex to surpass US$600 million from US$550 million in fiscal year 2014.

“Positively, Fitch believes that the free cash flow generation could turn positive from fiscal 2016 as expansionary capex falls in the absence of any sizable special dividend,” stated Fitch which gives the Digicel Group Ltd and its subsidiaries a ‘B’ rating with stable outlook.

“Digicel’s ratings reflect its solid performance and cash flow from operations generation, geographic diversification with a leading market position, strong brand recognition, as well as Fitch’s expectation for stable credit metrics over the medium term. The ratings are tempered by its aggressive shareholder distribution, high leverage and the exposure of its operations to low-rated countries,” stated Fitch.

Digicel generated “stable” but undisclosed operating results in the first nine months of fiscal year 2015, ending on March 31, 2015; and Fitch expects this trend to continue over the medium term.

“The company’s constant-currency-based revenue posted stable growth of 5.0 per cent with a solid earning before interest depreciation amortisation (EBITDA) margin of 43 per cent during the period,” stated the rating agency.

This was mainly driven by increasing data revenue supporting average revenue per user and steady growth in Papua New Guinea (PNG), Trinidad & Tobago, and Other Markets segment. Digicel also increased its subscriber base to 13.8 million as of December 2014 from 13.4 million a year earlier. Increasing smartphone penetration rose to 31 per cent as of December 2014 from 20 per cent a year ago, which reflects a trend away from traditional mobile voice revenues.