Fri | Dec 14, 2018

Digicel to reduce leverage by ‘one turn’

Published:Wednesday | September 5, 2018 | 12:00 AM

Digicel Group will refinance US$3 billion worth of debt, which forms part of a wider move to reduce its overall leverage.

It will result in the telecoms extending the interest payment period on its bonds by two years.

Digicel remained silent on the implications of the restructuring, but a representative of the company said the telecoms was "committed" to reducing leverage by "one turn" over the fiscal year. That means reducing its debt from six times to five times its adjusted earnings, which hit US$1 billion in its last fiscal year. The company plans to achieve this through a combination of "organic and inorganic" means, added the source - that is, refinancing of debt along with asset disposals in form of tower sales.

The person said Digicel has never missed an interest payment and that the refinancing will see the company continuing to meet its debt servicing obligations.

Under the deal, two of Digicel Group's subsidiaries have commenced the exchange of US$2 billion senior notes at 8.25 per cent that were due in 2020 for US$2 billion of newly issued notes at 8.25 per cent due 2022. Second, the US$1 billion notes at 7.125 per cent due 2022 will be exchanged for US$1 billion of newly issued 8.25 per cent senior cash Pay/PIK notes due 2024.

Digicel is attempting to address the US$3.3 billion debt pile that was due for repayment in 2020 and 2021 - the size of which had concerned the rating agencies. In July, Moody's Investors Service changed its long-term outlook on regional telecoms Digicel Group to negative as it awaited more information on the tower sales.

Digicel is selling 450 of its Caribbean cell towers, a deal it hopes to conclude by this month. It previously sold 202 communication towers in El Salvador to US-based Phoenix Tower International in a multimillion-dollar deal last year.

Moody's acknowledges that while Digicel holds the number one market position in 22 of its 31 markets, its debt levels and negative free cash flow are concerning.

Digicel, founded by Irish billionaire Denis O'Brien, operates in over 30 markets spanning the Caribbean, Central America and the Pacific Islands. The group reported a US$99-million net loss on revenues of US$2.4 billion for financial year ending March 2018. The previous year, it made a net loss of US$6 million.