Moody's rates new Digicel notes Caa3

Moody's Investors Service said it appended the limited default (LD) designation to the probability of default rating of Digicel Group Ltd. following the completion of its exchange offer, which is considered a distressed exchange under its definition of default.

The agency also said it upgraded Digicel's probability of default rating to Caa1-PD/LD from Caa3-PD.

Moody's also said it upgraded the rating on the new 2022 notes issued at Digicel Group One Ltd. to Caa1 from Caa2, assigned a Caa3 rating to the new 2022 notes at Digicel Group Two Ltd. and downgraded the rating of the new 2024 notes at Digicel Group Two to Caa3 from Caa2.

The agency also said it affirmed Digicel's Caa1 corporate family rating, as well as the ratings of its other debt instruments.

The outlook remains stable.

Despite the benefits coming from the debt extension, Moody's said it considers this transaction a distressed exchange mainly because of the company's untenable capital structure with high leverage of about 6.7x.

The LD designation indicates a limited default, reflecting the default on a portion of the group's debt, Moody's explained.

The ratings also consider the company's high leverage, large debt maturities in the coming years and weakening liquidity profile, the agency said.

While Digicel benefits from product and geographic diversification, leading market positions and high operating margins, it is present in emerging markets with a history of instability and exposure to adverse weather events and currency depreciation, Moody's said.

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