Fitch upgrades Digicel units but warns of risks

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Fitch raised much of Digicel’s $ 5.5 billion (€ 4.62 billion) debt from a note that signaled a real possibility of default, but warned that the recent track record of “Aggressive” actions by the telecommunications group owned by Denis O’Brien against bondholders would continue to lag. on its solvency.

The debt rating agency has raised its ratings on the Digicel units responsible for 3.83 billion dollars of the group’s borrowings from CCC and CCC + to B-. However, the new rating remains deep in the territory of junk status, 15 steps below its top-notch AAA rating.

Digicel, with operations in 32 markets in the Caribbean, Central America and Asia-Pacific regions, decided in April last year to restructure its then unsustainable level of debt of $ 7 billion. after years of declining profits, which led bondholders to write off $ 1.6 billion of what they are owed.

The deal involved creditors swapping their bonds for lower value securities and was described by credit rating agencies as a “distressed debt swap”.

It followed another deal struck with some bondholders the previous year to postpone debt repayment.

While Fitch concluded that Digicel is on a stronger financial footing after the debt overhaul, he cautioned, “The aggressive corporate governance that has resulted in two debt restructurings in the past two years is negative. for group ratings. ”

Digicel, which is expected to release its figures for next year next week, is expected to see revenue rise about 9% to $ 2.4 billion in the three fiscal years through March 2024, according to Fitch, as the rise Data revenue outweighs the decline in voice revenue, and revenue from its business and home entertainment services is also increasing.

“Refinancing risk”

Fitch also expects Digicel to maintain cash balances of around $ 400 million in the short term. Although the group does not face any major debt maturities until the $ 925 million unsecured note matures in March 2023, the rating company said “the risk of refinancing these notes will remain high.”

Digicel hired Citigroup late last year to advise on a possible sale of the Pacific business, spanning Papua New Guinea to Fiji, Samoa, Vanuatu Tonga and Nauru, after receiving a number of unsolicited approaches for unity.

However, a potential deal is expected to extend into the second half of 2021, as Covid-19 travel restrictions in the region have made it difficult for suitors to make site visits, sources say.

“A sale of the company’s assets in the Pacific is not factored into the baseline scenario, but would be positive for the company’s credit profile if a successful sale allowed the company to repay DGHL debt and reduce associated interest costs, ”said Fitch, referring to Digicel Group Holdings Limited, a company at the top of the group’s corporate structure.

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