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Digicel tries to ease debt servicing burden

Published:Monday | May 8, 2017 | 12:00 AM
Digicel founder and chairman Denis O'Brien.

Digicel International Finance Limited (DIFL) is currently in the process of refinancing a portion of its existing debt to ease the interest charges.

On Monday, the telecom indicated that it was expanding its current refinancing plan to also pay down US$250 million of 2020 bonds. Reports indicate that the increase pushed its target fundraising to nearly US$1.24 billion, portions of which would also redeem bonds initially set to mature in 2018 and 2019.

Antonia Graham, group head of communications at the telecom, said that the new rates would be Libor-based, currently at 1.78 per cent, plus 375 basis points. That's around 5.5 per cent at current rates. Comparatively, the 2020 bonds being refinanced bear a coupon of 7.0 per cent.

Graham said the company expects to finalise the refinancing by month end.

"Digicel offers no assurance that the refinancing will be consummated as expected, or at all, or that the notes will be repurchased as described in this press release," stated the company. It plans to repay the notes through a cash tender offer and/or redemptions.

Rating agency Moody's said Digicel's debt maturities would reach US$2.25 billion in 2020 split US$2 billion at Digicel Group and US$250 million at Digicel Limited but then dip to US$1 billion towards 2023. Moody's put Digicel's debt leverage at 6.5 times earnings.

Moody's sees Digicel as having adequate liquidity and expects the company to have approximately US$200 million in cash and full access to the new US$100-million revolving credit facility issued by DIFL at the close of this refinancing transaction, said Moody's.

In March, another rating agency, Fitch, indicated that Digicel Group needs to improve its free cash flow by next March in order to offset debt maturities.