Digicel bonds decline as executives field questions on cash levels

Telco’s third-quarter results revealed that its cash levels fell by almost two-thirds to $96m

Customers shop at a Digicel store for mobile phones in Fiji. Photograph: iStock

Customers shop at a Digicel store for mobile phones in Fiji. Photograph: iStock

 

The value of bonds in businessman Denis O’Brien’s Digicel fell on Thursday afternoon as the group’s top executives fielded questions from analysts on a call about the rate at which its cash position dropped late last year.

Digicel revealed the previous day to its bondholders, as it reported quarterly results, that its cash levels fell by almost two-thirds to $96 million (€84.4 million) in the three months to the end of December.

Executives told analysts on Thursday this was mainly the result of investing in working capital during the seasonally busy period before Christmas, and a tax payment made following the $90 million sale of telecom towers in the Caribbean in September, according to sources.

However, it is understood the company indicated that it expects cash to grow by the end of its financial year on March 31st, excluding any proceeds from potential asset sales.

The company’s chief executive, Jean-Yves Charlier, who took up the role four weeks ago, and new chief financial officer, David Lomas, appointed in early December, presided over the call.

Major restructuring deal

The market value of Digicel’s $1.3 billion of bonds that fall due in 2021 fell to 82.7c on the dollar from 87c, sending the yield on the notes to 15.9 per cent from 13 per cent. Other company bonds, including securities that investors had received last month under a major restructuring deal, declined in value.

Digicel’s latest report showed that its earnings before interest, tax, depreciation and amortisation (ebitda) declined by 2 per cent to $241 million in its fiscal third quarter, compared with the same period in 2017. It was dragged down by unfavourable foreign exchange fluctuations in some of its main markets across the Caribbean and Asia Pacific regions.

Stripping out currency effects, earnings rose by 3 per cent. Net debt at the end of December amounted to 6.8 times ebitda. The group had set a target almost a year ago of lowering its debt ratio from 6.7 times ebitda to 5.7 times by the end of March 2019 by boosting its earnings and selling off as much as $500 million of assets.

Next financial year

The company signalled in November, however, that the timing of the completion of asset sales may drift into the next financial year.

Meanwhile, French telecoms giant Orange confirmed last week in its full-year earnings report that it has €346 million in an escrow account to cover damages, costs and interest owed to Digicel on foot of a December 2017 ruling connected with a long-running dispute in the Caribbean.

Orange was found by a Paris court to have abused its dominant market position between 2000 and 2005 in the French West Indies. The company is appealing the decision.