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Digicel seeks grace period as $925m bond deadline looms

Digicel, the international telecommunications company with a significant presence in Bermuda, is in talks with creditors concerning $925 million in bonds coming due tomorrow that the company is unable to repay.

Digicel has sought a 30-day grace period from creditors, which has been agreed by a majority of bond holders in excess of the 50.1 per cent threshold required in such circumstances.

A spokesman for Digicel said: “Digicel is in constructive discussions with over 75 per cent of the holders of Digicel Limited’s 6.750 per cent senior notes who have agreed to a 30-day grace period, that will automatically be extended to 90 days if the company enters into a restructuring support agreement with a requisite majority of note holders.

“The grace period provides Digicel with the flexibility to continue constructive and ongoing discussions aimed at securing a more sustainable capital structure for the group in light of the impact on group earnings of ongoing unrest in Haiti.

“As discussions are confidential, the company cannot comment further at this time, but additional updates will be provided as appropriate.

“In the interim, Digicel’s operations in each market throughout the Caribbean (including Bermuda) continue to trade as normal.”

Fitch Ratings has downgraded the long-term issuer default rating of Bermudian-based Digicel Group Holdings Limited (DGHL) to “CC” from “CCC-” as well as the IDR of Digicel Limited (DL) to “CC” from “CCC-”. Fitch also downgraded the IDR of Digicel International Finance Limited (DIFL) to “CC” from “CCC+”.

It said that Digicel's IDRs reflect the increasing likelihood that the group will enter a debt restructuring with creditors.

Digicel has a presence in 25 territories, including Haiti, the company’s largest market.

Fitch said: “The group's operating performance will be affected by the macroeconomic weakness in Haiti. The elimination of fuel subsidies in the island has induced protests and fuel shortages, which have disrupted the group's ability to provide uninterrupted coverage and have also increased costs as its cell sites run on diesel.

“The Haitian gourde has continued to depreciate in 2023. Fitch forecasts DGHL's consolidated net leverage around 8.0x in fiscal year-end 2024, considering proforma debt of $4.5 billion, cash declining to less than $300 million from close to $500 million as of September 2022, and operating ebitda of around $550 million in fiscal year-end 2024 from $580 million in fiscal year-end 2022.”

Fitch added: “The downgrade of DL reflects its very high credit risk due to limited liquidity to pay off its $925 million unsecured notes maturing in March 2023.

“The downgrade of DIFL reflects the increasing risk of a comprehensive restructuring, with incremental debt being added to its capital structure or otherwise resulting in an outcome deemed by Fitch to be a distressed debt exchange.

“Haiti's macroeconomic weakening, resulting from its fuel crisis, has further pressured DIFL's operating performance, which Fitch expects will remain weak in FY 2024. DIFL has $2.2 billion of debt maturities coming due in May 2024.”

Fitch said DGHL's consolidated financial debt as of September 2022 was approximately $4.4 billion, of which $2.8 billion was at DIFL, $1 billion at DL and $600 million at DGHL.

In addition, the ratings agency said, about $100 million of interest has accrued.

DGHL's debt includes $215 million of payment-in-kind perpetual convertible notes.

Approximately $1.2 billion of DIFL's $2.2 billion of debt maturing in 2024 is fixed-rate debt at risk of resetting at higher rates.

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Published February 28, 2023 at 7:55 am (Updated February 28, 2023 at 10:20 am)

Digicel seeks grace period as $925m bond deadline looms

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