Fitch highlights Digicel’s ‘stressed’ capital position in note on rival

Cable & Wireless pricing set to remain stable due to Digicel position, ratings agency says

Fitch, one of the world's leading credit ratings firms, has highlighted that businessman Denis O'Brien's telecommunications group Digicel has a "stretched capital structure" in a report on the group's main rival across many Caribbean markets.

Raising its outlook on Cable & Wireless Communications’ (CWC) credit rating to ‘stable’ from ‘negative’, Fitch noted that the firm operates alongside Digicel across a number of Caribbean markets. CWC is a unit of New York-listed Liberty Latin America.

“Due to Digicel’s stressed capital structure, [product] pricing is expected to remain rational in the near term and Fitch does not believe the risk of a sizable new entrant to be high,” Fitch said. “Under this environment, Fitch expects the company’s leading market positions to remain stable over the medium term despite strong competition from Digicel.”

A spokesman for Digicel said last week that the company had a “very strong track record of refinancing comfortably ahead of bond maturities”, as concerns grew in financial markets over the company’s ability to raise funds to redeem $2 billion (€1.7 billion) of bonds that mature in September 2020.

The value of the bonds fell to a record low of 66.2 cent on the dollar last year, sending the market interest rate – or yield – on the notes to 30.2 per cent from 8.02 per cent in January. However, the bonds have since rallied to 73.8 cent on the dollar, pushing the yield down to 24.3 cent.

Digicel has pitched to investors in recent months that it can reduce its $6.6 billion net debt from 6.7 times earnings before interest, tax, depreciation and amortisation in March to 5.7 times by the end of March next year.

The company, which abandoned plans for a $2 billion initial public offering in October 2015, had a cash balance of $155 million at the end of March as well as access to $54 million under a credit facility, according to Moody’s, another leading credit ratings firm.

The company aims to raise as much as $500 million from asset sales – including wireless communications towers across the Caribbean – in the next nine months.

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