O'Brien's Digicel to raise $250m in funding round

DENIS O’BRIEN’S Caribbean-based mobile phone group Digicel Ltd yesterday announced its intention to raise $250 million through a private placement of senior notes that would be due in 2020.

It said the proceeds would be used for “general corporate purposes, including potential acquisitions, future capital expenditures and debt service obligations”.

It is understood that this will not include a bid for Eircom, the Irish telco that was last week formally put up for sale by the board of the company.

Digicel ran the rule over Eircom last year but decided against tabling a proposal that would address the Irish company’s debt restructuring.

Digicel Ltd comprises the company’s operations in the Caribbean and El Salvador.

Ratings agency Moody’s yesterday assigned a B1 rating to the $250 million in senior notes.

Moody’s also affirmed Digicel’s corporate family rating – Digicel Group Ltd (DGL) – and probability of default both at B2, and maintained the “stable rating outlook”.

Digicel Ltd is a wholly owned subsidiary of DGL, which also has operations in the Pacific.

Moody’s expects DGL’s debt to Ebitda (earnings before interest, tax, depreciation and amortisation) ratio to hover between 4½ and five times over the next two years.

It said DGL’s Ebitda growth would reflect continued success in growing its markets, particularly in the south Pacific territories, and increasing cash flow contributions from Haiti.

Moody’s said that while Digicel continues to have strong diversification, this is mitigated by its exposure to Jamaica and Haiti, which are both struggling to revive their economies.

The ratings agency expects Digicel will end the year to March 31st, 2012, with about $615 million in cash on the balance sheet.

“The outlook also reflects Moody’s view that over the next two years, the company will continue to use debt to fund the take out of standalone financings at its subsidiaries or acquire more equity from its principal shareholder, Denis O’Brien,” the ratings agency said.

Digicel’s revenues rose by 16 per cent to $1.24 billion in the six months to the end of September.

Its Ebitda increased by 15 per cent to $524 million in the period.

This latest funding round will bring to more than $4 billion the amount that Digicel Ltd has raised in bonds since 2005.