Business Irish

Sunday 18 November 2018

Digicel bonds slip to fresh low with the market waiting on details of sale of communication towers

Digicel bonds fell to fresh lows yesterday, having tracked lower since ratings agency Moody’s changed its outlook to negative on the Denis O’Brien- owned telecoms operator. Stock photo: PA
Digicel bonds fell to fresh lows yesterday, having tracked lower since ratings agency Moody’s changed its outlook to negative on the Denis O’Brien- owned telecoms operator. Stock photo: PA
Donal O'Donovan

Donal O'Donovan

Digicel bonds fell to fresh lows yesterday, having tracked lower since ratings agency Moody’s changed its outlook to negative on the Denis O’Brien- owned telecoms operator.

Digicel bonds due to be repaid in 2020, the company’s next big debt maturity deadline, slipped to trade at 72.77pc of face value yesterday – implying a yield to investors of 24.8pc.

As recently as January the same bonds were trading at more than 100pc of face value. Swings on bond markets don’t impact Digicel’s borrowing costs – the coupon or interest on the bonds remains constant at 8.25pc – but it highlights potential difficulties refinancing the debt.

Moody’s changed its long-term outlook on Digicel Group to negative last week, citing debt levels and uncertainty around the timing and amounts to be raised from asset sales, though it did not change the rating itself.

Digicel has told investors that it plans to reduce its €6.2bn debt burden by “one-turn” – a multiple of borrowings to earnings – to 5.7 times earnings from 6.7 times, by next year. Achieving that is likely to be key to refinancing bonds at attractive levels in advance of the 2020 maturity.

A spokesman for Digicel said the company is committed to debt reduction and had a track record of refinancing debts well in advance. “Digicel remains fully committed to deleveraging by one turn to meet its gross deleveraging target by March 2019. Initiatives deployed to date continue to gain traction. Digicel has a very strong track record of refinancing comfortably ahead of bond maturities and it has no major maturities under two years,” he said.  

Moody’s also cited Digicel’s continued strengths in its latest assessment.

“Digicel’s B2 CFR (rating) continues to reflect its product and geographic diversification, strong margins, and leading market positions. Digicel holds the number-one market position in wireless telecommunications in 22 of its 31 markets,” Moodys noted.

Digicel’s debt reduction strategy includes raising around $500m (€430m) from asset sales including a sale and leaseback of 450 wireless communications towers and boosting earnings.

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