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Telecommunications services provider Digicel Group received its first major debt rating since restructuring, with expectations for core earnings to reach US$800 million this financial year.
Ratings agency Standard & Poor’s has assigned a ‘B’ issue-level rating with a stable outlook to Digicel International Finance Limited, DIFL, which holds US$1.025 billion in senior secured term loans due in 2027.
It marks the first major assessment of Digicel’s debt by a leading rating agency since its financial restructuring, which saw the company effectively default on bonds, undergo a debt-for-equity swap, and transition to hedge fund majority control. Founder Denis O’Brien reduced his stake to a minority position, while a new chairman, Rajeev Suri, was appointed in November 2023.
Going forward, Digicel is projected to reduce debt leverage below 4.0 times its annual earnings within the next 12 to 24 months as part of its revised strategy, while maintaining a cautious approach to debt financing and capital expenditure.
“These mainly restrict the company’s ability to issue additional debt. The covenants also restrict acquisitions, asset divestments, liens, and investments, and define mandatory prepayments under the facilities, as well as events of default,” S&P said.
Digicel is projected to deliver EBITDA margins above 40 per cent through fiscal year 2027, supported by its market positions in 25 Caribbean and Central American countries, leveraging high barriers to entry and dynamic pricing.
“We forecast adjusted EBITDA to approach US$800 million by the end of fiscal 2025,” S&P stated, adding that earnings should increase further by 2027.
Digicel is expected to deploy capital expenditure of US$216 million in 2025, and rising to US$240 million annually in 2026 and 2027.
DIFL, a subsidiary of Digicel Midco Limited, consolidates the group’s telecoms operations in the Caribbean and Central America and carries over 80 per cent of the group’s debt.
In January 2024, Digicel overhauled its organisational, debt, and ownership structure, S&P indicated. As a result, Digicel Midco Limited was established to consolidate the group’s operations and close to 99 per cent of its outstanding financial obligations.
“The term loans are secured by a collateral consisting of the group’s assets, with certain exceptions, including restricted assets, spectrum licences, vehicles, governmental or regulatory licences, and receivables,” S&P said, outlining the security package backing the financing.
Additionally, under its credit agreement, Digicel cannot enter into activities that would significantly increase its debt profile.
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