Moody’s downgrades Digicel Group

Rating agency says a return to sustained revenue and earnings growth has not materialised

Moody’s, the ratings agency, has downgraded Digicel Group and changed its outlook for the company to negative

Moody's, the ratings agency, has downgraded Denis O'Brien's Caribbean telecoms Digicel and changed its outlook for the company to negative.

The agency said the decision to downgrade its rating of the group reflected its view that “the risk of Digicel making another distressed exchange or debt restructuring within the next 12-18 months has increased, considering the still weak operating results and liquidity of the group.”

It said the telco “has continued to report declining earnings, negative free cash flow and increasing leverage”. “A return to sustained revenue and earnings growth has not materialised and any improvement to the company’s financial profile will only be very gradual, resulting in Digicel still facing high refinancing risk.”

Last month a Bloomberg report said the group's underlying revenues rose 1 per cent to $595 million (€528 million) but reported revenues slipped by 3 per cent to $570 million, partly due to the effects of foreign currency exchange.


According to Moody’s, Digicel’s next large debt maturity is the $1.3 billion senior unsecured notes at Digicel Limited due April 2021.

The agency said Digicel's liquidity remains overall weak, although the group improved its cash balance and debt maturity profile when it issued $600 million of senior secured notes at Digicel International Finance Limited in March. "However, as long as free cash flow remains negative, liquidity will weaken again," the agency said.

A spokesperson for Digicel said the group expects its leverage to have peaked in the last three months, declining thereafter as underlying revenue and earnings improve.

“Outlook for the financial year 2020 is to deliver underlying growth in revenue and earnings (EBITDA) of low to mid single digit and mid single digit respectively. Our leverage outlook is net of any asset sales or our share of the proceeds of the Orange litigation process,” the spokesperson said. The litigation relates to a long-running anti-competitive practices dispute in the Caribbean between Digicel and the French telecoms giant.

Digicel was founded by Mr O'Brien in 2001 and now operates in 32 markets across the Caribbean, Latin America and Pacific regions.

The group is now more than two years into a transformation programme, initially known as Project Swan and officially named Digicel 2030 Global Transformation upon its launch early in 2017. The group pledged to cut staff numbers by 25 per cent, offload assets and restructure its operations.

Michael McAleer

Michael McAleer

Michael McAleer is Motoring Editor, Innovation Editor and an Assistant Business Editor at The Irish Times