Denis OâBrienâs Digicel Group faces âimminent refinancing riskâ and should restructure a big a part of its nearly $7 billion (â¬6.three billion) debt pile within the subsequent 18 months, Fitch stated, because it pushed its view on the telecoms groupâs creditworthiness deeper into what’s termed junk standing.
Fitch lowered its scores on Digicel by one stage to CC on Wednesday night time, which means a âdefault of some form seems probableâ, in response to the firmâs personal definition. The ranking is eight rungs under what Fitch deems to be an investible grade.
âProbably the most speedy concern is [Digicelâs] $1.three billion notes maturing in April 2021, which Fitch believes the corporate will wrestle to refinance amid stagnant working efficiency,â the company stated. âFitch expects that Digicel should restructure debt at a number of ranges within the subsequent 12-18 months, as a result of groupâs unsustainable capital construction and imminent refinancing danger.â
Digicelâs bonds have tumbled in worth this yr amid mounting issues about how sustainable the groupâs debt mountain is following earnings declines lately. The corporate, arrange by Mr OâBrien in 2001, operates in 32 markets throughout the Caribbean, Central America and Asia Pacific areas.
It has spent greater than $5 billion creating its networks and enterprise, which has 14 million subscribers, in response to its web site. Mr OâBrien took $1.1 billion of dividends out of the group between 2013 and 2015.
In January, collectors holding nearly $three billion of Digicel bonds agreed to postpone getting their a refund by accepting longer-dated notes in change for his or her holdings. This was described by credit score scores companies as a distressed debt change or restructuring.
A restructuring of the 2021 bonds, in the meantime, would doubtless quantity to a default occasion and set off a restructuring of different debt, together with $three.eight billion of bonds which can be as a consequence of mature between 2022 and 2024, Fitch analyst Sul Ahmad advised The Irish Occasions.
Digicel could be anticipated within the coming months to start out actively working coping with the 2021 bonds. Whereas Fitch stated an organization inside the group, known as Digicel International Finance Limited, has some headroom to difficulty contemporary secured debt, if it raised a major quantity of borrowings it might pressure the broader businessâs funds.
âThe groupâs efficiency has deteriorated lately as double-digit income declines in conventional voice merchandise outweigh progress elsewhere,â Fitch stated, including weakening within the currencies in its principal markets in opposition to the US greenback has solely added to Digicelâs issues.
âThe corporate is diversifying away from its core cell focus through double-digit progress within the enterprise options and residential leisure segments; nevertheless, these segments solely account for about 20 per cent of revenues,â it stated.
Digicelâs debt stood at 7.5 occasions earnings earlier than curiosity, tax, depreciation and amortisation (ebitda) on the finish of June, up from 6.6 occasions in March 2018, in response to Fitch.
Digicel declined to touch upon the Fitch downgrade forward of the reporting of quarterly outcomes subsequent week. Nevertheless, the corporate beforehand stated that its debt ratio peaked within the three months to the top of June, its monetary first quarter, and is ready to say no as gross sales earnings enhance. The corporate is forecasting a âmid-single digitâ proportion improve in earnings in its present monetary yr to March 2020.