There are concerns that the Digicel Group is in serious financial trouble.
A report published in the Irish Times on Friday says Digicel, headed by Irishman Denis O’Brien, has started an unprecedented cost-cutting plan and hired financial consultants to help cut its massive debt burden as the mobile phone group grapples with declining earnings.
The newspaper quotes an analyst with US credit research firm CreditSights, as saying that Digicel’s 6-point-5 billion US dollar debt is at “unsustainably high levels.
According to CreditSights analyst Micheal Chakardijian, Digicel’s debt is over 600-percent more than the company’s earnings.
Chakardijian says these debts are unsustainably high, and he’s advising bondholders to sell some of their holdings.
If Digicel was a country, its financial position would be more than three times worse off than the world’s most indebted countries, including Jamaica and Greece.
Digicel’s debt, at USD$6.5-billion, is over JMD$833-billion. That’s JMD$250-billion more than the country’s national budget.
And the exchange rate is part of the problem.
Digicel’s debts are in US dollars, but it’s trying to pay them off in weakening currencies from Haiti, Papua New Guinea, and Jamaica.
In addition, the company has mounting problems, including declining revenues from mobile calls and the ongoing need to pump cash into its fibre network.
Despite its 14-million subscribers in 32 markets worldwide, Chakardijian says the company’s financial position is “stressed”.
It’s is in the middle of its third consecutive year of earnings decline.
Now Digicel has recently implemented a cost-cutting plan dubbed “Project Swan”. However, Chakardijian says the plan is ambitious and opaque. He says the company faces near term financing risks.
He says the group’s debt level is so high that it has “no equity cushion” and that this gives them little wiggle room for poor performance.
Meanwhile, Digicel says it fundamentally disagrees with the conclusions noting that it has a positive outlook.
In November, Digicel executives pitched a plan to investors to cut its debt ratio by one-third by March 2019 as it sees profits finally rebounding in its next financial year.
This after investing USD$2.3-billion in its network over half a decade.
Last year, Digicel CEO Denis O’Brien pulled an initial public offering of Digicel shares, in which the company was seeking to raise as much as USD$2-billion on the New York Stock Exchange.
Digicel blamed volatility in global markets at the time.
Mi tell unnuh from long time seh dem a hav problems!
But more to da story yah than dem can talk, it obvious. Mi hav a company and mi realise seh mi a loose more than mi a gain and mi nuh look fi do suptn bout it from day one! What happen to the money to the side and di emergency strategy that big companies hav to bail out themself when things start fail etc!
Di racket Obrian a run a catch up wid him slowly but surely inna di last couple years. A long time him a hav problems over inna Ireland! And mi doubt fi him net worth drop! Unnuh gwaan look and see di more in debt Digicel get, how much big company and politican (mainly di big PNP one dem) a go bawl seh government fi help bail out Digicel cause dem hav shares inna it! Watch di ride!
Dem a cut staff hard
Translation costs (earnings convert and go back in foreign currency) a dat a reach Scotia Bank too but only Scotia no so highly leveraged.