Digicel’s earnings rise as it looks towards refinancing $1.3bn of bonds

Denis O’Brien’s Digicel telecoms group saw its earnings rise in the three months to the end of December, providing some comfort to the group’s debt investors ahead of a keenly eyed refinancing of $1.3 billion of bonds that falls due early next year.

Earnings before interest, tax, depreciation and amortisation (ebitda) rose by 4 per cent year-on-year to $251 million in the third quarter of Digicel’s financial year. This was driven by more favourable currency movements in some of its main markets against the dollar, and ongoing data revenue growth, the company told bondholders on Monday.

Underlying service revenues rose by 3 per cent, while mobile data revenue increased by 10 per cent, helping to deliver a fourth straight quarter of sales growth in the mobile division as voice turnover continued to decline, according to sources briefed on the figures.

Digicel’s cash position continued to decline in the quarter, to $126 million from $180 million in September and $214 million earlier in the year. Its net debt ratio declined to 6.8 times ebitda from 7.3 times six months earlier, according to the sources.

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The group’s net debt currently stands at about $6.8 billion.

Growing issue

The Digicel update did not address how it plans to go about refinancing $1.3 billion of bonds that mature in early 2021, which has become a growing issue for the company’s creditors and debt ratings agencies.

Fitch warned last November that Digicel faces "imminent refinancing risk" and will likely have to restructure the 2021 bonds, which may in turn trigger a restructuring of a further $3.8 billion of debt that is due to mature between 2022 and 2024.

The market value of the 2021 bonds was little changed at 80 cent on the dollar in midday trade in New York as investors digested the latest set of results. They had been changing hands at as low as 63 cent last August.

A spokesman for the company declined to comment on the results, first reported by Bloomberg.

“Digicel has a successful track record of refinancing debt maturities before they fall due, and it continues to evaluate options in this regard,” he said.