Digicel’s Financial Transformation: Moody’s Upgrades Ratings
Embracing a new chapter of financial stability and growth, Digicel International Finance Limited (“Digicel”) received an upgrade in its corporate family rating (CFR) and senior secured bank credit facility ratings to B3 with a stable outlook from Moody’s Ratings (“Moody’s).
Amidst the shifting tides of economic landscapes, Digicel’s recent upgrade reflects a promising future marked by improved liquidity and capital structure. The company’s debt restructuring process has paved the way for a positive track record, expected to manifest through an EBITDA margin exceeding 40%, fueled by its robust competitive stance in key markets.
Ratings Rationale:
– Digicel’s B3 CFR mirrors a manageable capital structure and ample liquidity, underpinned by projected positive free cash flow (FCF) generation fueled by restrained dividend distributions and capex.
– Key credit metrics include Moody’s adjusted leverage of 3.1x and reported FCF of $14 million for the preceding twelve months up to March 2024, affirming a robust financial stance.
– The B3 rating encapsulates Digicel’s presence in developing markets susceptible to volatility and currency devaluation risks.
While navigating the complexities of operating in emerging markets, particularly in regions like Haiti, generating approximately 18% of revenue, Digicel faces challenges attributed to economic uncertainties. The long-term outlook underscores the pressure imposed by low-rated countries on the company’s rating.
With a cash balance of $200 million as of March 2024, Digicel’s liquidity remains stable. However, residual impacts from challenging operational environments in markets like Haiti continue to exert pressure on cash flows.
Factors for Rating Progression:
– Governance enhancements such as improved capital structure, liquidity, and organizational setup illustrate a positive trajectory in Digicel’s financial landscape.
– Future upgrades hinge on operational execution, sustainable revenue growth, and liquidity maintenance aligned with stringent financial metrics.
Noteworthy Considerations:
– Positive outlooks entail consolidated adj. debt/EBITDA below 4.5x, EBITDA-capex/interest expense over 1.5x, and successful debt maturity extension strategies.
– Conversely, downgrades may occur due to deteriorating liquidity, negative FCF trends, or impending challenges in refinancing debt obligations.
As the digital realm continues to evolve, Digicel’s strategic reinvention encapsulates resilience and adaptability, poised to steer through economic uncertainties with renewed vigor.
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