Ratings agency Fitch has downgraded Digicel Group Holdings and its subsidiaries. The Long-Term Issuer Default Rating of Digicel Group Holdings has been changed from CCC to CCC-.

The credit rating for Digicel Limited is now CCC-, down from CCC+ and for Digicel International Finance (DIFL) CCC+, down from B-.

According to Fitch, the downgrade reflects the high refinancing risk of Digicel’s US$925 million unsecured notes maturing in March 2023, due to challenging market conditions.    

Limited cash flow from Digicel International Finance was also a consideration in the downgrades of Digicel Limited and Digicel Group Holdings.  The downgrade of DIFL reflects the risk of a comprehensive restructure with incremental debt being added to its capital structure, as was done during Digicel’s 2020 debt restructuring.

Fitch reports that “Digicel’s financial profile is materially weaker than its regional diversified telecom peers in the speculative-grade rating categories, including Millicom International Cellular S.A. (BB+/Stable), and Cable & Wireless Communications Limited (BB-/Stable).”                              

“Digicel’s business profile is relatively less diversified on a service basis, given its reliance on mobile and a position in generally poorer countries with significant exchange rate volatility,” the agency added. 

The Irish Times is reporting that founder and chairman Denis O’Brien, is facing the prospect of ceding 47 per cent of Digicel to disgruntled bondholders within months if he cannot come up with the payments.

Elevated refinancing risk

The ratings agency commented that “Digicel Limited’s ability to successfully refinance its US$925 million senior unsecured notes due in March 2023 outside of a coercive exchange remains uncertain due to deteriorating macroeconomic fundamentals, rising interest rates and unfavourable market conditions. There is a low margin of safety for the company, and a default and/or default-like process is a real possibility.”

In Fitch’s view, there is an increasing likelihood of a comprehensive restructure across the various entities due to the maturity of more than 70 per cent of the group’s consolidated debt within two years.