Moody’s Ratings has upgraded Digicel International Finance Limited’s corporate family rating (CFR), and its senior secured bank credit facility ratings to B3, with a stable outlook.
In a release on Tuesday, Moody’s explained that the rating action was updated following the conclusion of the review of Digicel’s status initiated on February 26, 2024.
Moody’s said, “The upgrade reflects the company’s improved liquidity and capital structure following the company’s debt restructuring process. It also incorporates our expectation that the company will build a positive track record under its new configuration posting Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) margin above 40 per cent supported by the company’s solid competitive position in the markets in which it operates.”
Digicel had entered into debt restructuring in March 2023, with the process officially completed in January 2024.
The release stated, “The restructuring process significantly changed Digicel’s interest expenses and liquidity profile, providing the company with financial flexibility. Nonetheless, rating progression would require visibility and execution over the company’s operating plan.
“Digicel’s liquidity is adequate, supported by a cash balance of $200 million as of March 2024. However, the company’s cash flows have been under pressure due to tough operating environment in markets such as Haiti, while the situation is more stable now, its consumer environment remain fragile.”
Moody’s added, “Digicel’s B3 corporate family rating (CFR) reflects the company’s more manageable capital structure and adequate liquidity. The rating also incorporates our expectation of positive free cash flow (FCF) generation driven by no dividend distributions and capex below 15 per cent of revenues. Digicel’s CFR takes into consideration adequate credit metrics for the rating category including Moody’s adjusted leverage of 3.1x and positive FCF generation of $14 million for the last twelve months ended March 2024. We also expect the consolidated leverage for the group including the holding companies to remain below 4x.”
Moody’s said the B3 rating incorporates Digicel’s presence in emerging markets with a history of instability and exposure to adverse weather events, and its exposure to the risk of currency depreciation against the US dollar.
“Digicel continues to face a number of challenges that constrain operating improvements, which include difficult economic and operating conditions in some of the company’s large markets, namely Haiti, which accounts for around 18 per cent of the company’s revenues. Longer term, the company’s exposure to low-rated countries could also put pressure on Digicel’s rating.”
However, Moody’s said Digicel’s ratings could be upgraded if the company continues building a positive operating track record under its new configuration, including execution of its operating plan to continue with steady revenue growth and cash flow generation, while maintaining an adequate liquidity.
