Digicel credit ratings downgraded by Fitch
Digicel’s credit ratings have been downgraded by Fitch Ratings, which expects the telecommunications group to restructure its debt within the next 18 months.
In commentary published last night, Fitch described Digicel’s capital structure as “unsustainable”.
Digicel operates in Bermuda and 30 other markets across the Caribbean, Central America and Asia Pacific, according to the group’s website.
“Fitch expects that Digicel will have to restructure debt at multiple levels in the next 12 to 18 months, due to the group’s unsustainable capital structure and imminent refinancing risk,” Fitch stated.
Fitch was unimpressed by the debt restructuring the company undertook this year.
“The distressed debt exchange that DGL concluded in January 2019 involved an extension of maturities rather than principal haircuts or debt/equity swaps. Fitch expects increasing interest expense to consume most of the company’s declining operating income, which contributes to a cycle of cash burn.”
The rating agency said Digicel’s leverage, as measured by consolidated net debt to Ebitda (earnings before interest, taxes, depreciation and amortisation), had increased to 7.5 times as of June 30, 2019, up from 6.6 times at year-end 2018.
On the refinancing risk, Fitch said: “The most immediate concern is DL’s US$1.3 billion notes maturing in April 2021, which Fitch believes that the company will struggle to refinance amid stagnant operating performance.”
Fitch added: “The group’s performance has deteriorated in recent years as double-digit revenue declines in traditional voice products outweigh growth elsewhere.
“These issues have been exacerbated by local currency depreciation against the US dollar, which Fitch expects to continue.
“The company is diversifying away from its core mobile focus via double-digit growth in the business solutions and home entertainment segments; however, these segments only account for approximately 20 per cent of revenues.”
Fitch also noted that Digicel had a “solid business profile, with leading mobile market shares in its well-diversified operational geographies supported by network competitiveness”.
Fitch downgraded the long-term foreign currency issuer default ratings of all of the rated entities in the Digicel corporate structure including: Digicel Group Ltd, to CC from CCC-; Digicel Group Two Ltd to CC from CCC-; Digicel Group One Ltd to CCC from B-; Digicel Ltd to CCC from B-; and Digicel International Finance Ltd to B- from B. The outlook on DIFL has been revised to negative from stable.
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