Digicel’s debt burden mounts as earnings dip

Denis O'Brien's Digicel saw its debt burden increase in the three months to the end of December as earnings dipped, increasing pressure on the telecoms group as it seeks to lower its borrowings ratios.

The Jamaica-based group, which completed a massive debt restructuring earlier this year, told its bondholders on Wednesday that its net debt amounted to 6.8 times earnings before interest, tax, depreciation (ebitda) at the end 2018, its fiscal third quarter, according to sources.

Digicel had set a target almost a year ago to lower its debt ratio from 6.7 times ebitda to 5.7 by the end of March 2019 by boosting its earnings and selling off unwanted assets.

Ebitda for the third quarter declined by 2 per cent to $241 million (€212 million) on the same period in 2017, dragged down by unfavourable foreign-exchange fluctuations in some of its main markets across the Caribbean and Asia Pacific regions.

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Stripping out currency effects, earnings actually increased by 3 per cent.

Revenues for the period declined by 1 per cent to $572 on a constant-currency basis, but fell by 4 per cent on a reported basis.

While the group’s mobile voice revenues and lower-margin wholesale revenues declined during the reporting period, sales across data, business solutions and the group’s fibre-to-the-home network increased. A spokesman for the company declined to comment on the results.

Following four months of negotiations, Digicel said in early January that almost 98 per cent of the holders of $2 billion of bonds due for repayment in 2020 had agreed to postpone getting their money back from the debt-laden group, by swapping their holdings for notes that will mature in 2022.

The same proportion of investors in a separate $1 billion of existing 2022 debt were persuaded to exchange their notes for ones that will be redeemed in 2024.

The company named Jean-Yves Charlier as its new chief executive four weeks ago, a month after the previous holder of the role, Alex Matuschka von Greiffenclau, died suddenly after less than a year in the post.