(Jamaica Gleaner) Telecommunication services provider Digicel Group plans to raise US$2.9 billion, most of which is aimed at refinancing existing debt.
Rating agency Fitch assigned a ‘B’ rating and a recovery rating of ‘RR4’. Fitch ranks recovery ratings in five tiers, with RR4 reflecting the ‘average recovery prospects given default’.
“The rating reflects the notes’ structural subordination in the group’s structure and lower recovery prospects. Proceeds will be used to refinance existing debt,” Fitch said in a release.
Digicel plans to raise US$1.55 billion in senior secured notes, US$415 million in senior unsecured notes, US$750 million in term loans, and US$200 million via a revolving credit facility.
The debt matures in 2032 and 2033, with most proceeds earmarked for paying out 9.0 per cent and 10.5 per cent notes due in 2027 and 2028. The revolving facility will serve as a liquidity buffer and is not expected to be drawn immediately.
Fitch expects Digicel’s cash flow to improve through moderate capital spending on network upgrades and the absence of dividend payouts. Critics have argued that previous dividend distributions exacerbated the company’s leverage and hindered its ability to meet bondholder obligations.
In November 2023, telecoms veteran Rajeev Suri was appointed chairman of Digicel, replacing founder Denis O’Brien, who remains a director on the company’s board. The leadership change was part of a broader restructuring that transferred majority ownership of the telecoms to hedge fund investors. The overhaul followed Digicel’s effective default on bond repayments, leading to a debt-for-equity swap and a shift in control to hedge fund investors.
Fitch expects Digicel to deliver core earnings, or EBITDA, of US$730 million in the 2026 financial year, compared to US$600 million in the prior period.
The company’s earnings are projected to grow due to steady mobile revenue, growth in business services, and cost-saving efforts. Digicel’s debt levels are expected to ease slightly from 4.1 times to 4.0 times EBITDA by 2026.