Sat | Jan 20, 2018

Digicel draws on US$100m for hurricane spending

Published:Wednesday | December 13, 2017 | 12:00 AMSteven Jackson
In this September 2017 photo, unnamed Digicel employees move equipment as the company prepares for Hurricane Maria. Digicel Group drew down on US$100 million of debt to deal with storm-related expenses in the wake of hurricanes that damaged several Caribbean islands.

Hurricanes in the Caribbean and sluggish Pacific growth led to reduced free cash flow and slightly higher debt levels for telecoms Digicel Group, according to a report from Fitch Ratings released this month.

The region was hit by hurricanes Irma and Maria during the season. Digicel, in response to Gleaner Business queries, said its debt-reduction programme remained on track.

"Our current leverage is in line with our expectations and we remain focused on deleveraging the business over time as per our stated strategy," stated the telecoms, whose operations span more than 30 markets in the Caribbean, Central America and Pacific Islands.

Digicel refinanced roughly US$1.2 billion of its debt earlier this year to reduce its financing costs going forward.

Fitch said Digicel "drew down its US$100 million revolver" to cope with the cash flow related to the impact of storms that hit the region, and that the company "expects to fully pay it off by end fiscal 2018 as insurance proceeds are received". Digicel Group's financial year ends in March.

Fitch said the telecoms' debt levels remain high, saying its adjusted net leverage, including off-balance-sheet adjustment, remained elevated at 6.3 times EBITDA in the September quarter. It compares to 6.1 times at year ending March 2017.

Digicel originally planned to hit US$100 million in free cash flow with debt at 5.2 times for its year end, but has now revised it to US$30 million to US$50 million and 5.5 times to 5.7 times by fiscal year 2018. The revision was due mainly to negative hurricane impact and sluggish performance in Papua New Guinea.

Digicel Group's total gross debt amounted to US$6.6 billion, following its subsidiary loan refinancing and redemptions, Fitch reported. The company's debt profile is mainly composed of its US$1.26-billion senior secured loans at Digicel International Finance Limited, US$2.2-billion senior unsecured notes at Digicel Limited and US$3-billion subordinated notes at Digicel Group Limited. The company also has US$70 million loans outstanding at DPL, according to Fitch.

Digicel Group earned 6.4 per cent less revenue, at US$2.5 billion, for the year ending March 2017; while operating EBITDA, or earnings before interest tax depreciation and amortisation, remained flat at US$1.04 billion. Its pretax income of US$116 million declined from US$131 million a year earlier.

Fitch rated Digicel bonds at a stable B/Stable rating. It said the rating would come under pressure if Digicel fails to increase free cash flow and reduce debt. A relatively weak free cash flow by 2019 would hinder the company to achieve a comfortable debt maturity schedule, Fitch said.

steven.jackson@gleanerjm.com