Moody's affirms Digicel

Moody's Investors Service said it affirmed Jamaica-based Digicel Ltd.'s B1 corporate family rating and the B3 senior unsecured debt rating following the announcement that the company will purchase Bouygues Telecom Caraibe in an all-cash transaction funded almost entirely by additional senior secured bank debt. The outlook remains positive.

Since Moody's assigned initial ratings to Digicel in July 2005, the company has outperformed the agency's expectations with better revenue and cash flow growth putting upward pressure on the ratings. While the pending all debt-financed acquisition dilutes Digicel's financial strength in the near term, Moody's predicted that Digicel's credit metrics will resume their improvement after the acquisition and ratings will likely move higher within the next 18 to 24 months.

Moody's said it remains concerned that, despite the company's low leverage (pro forma debt to EBITDA of just over 3x), the substantial amortization requirements of the senior secured bank debt in the company's capital structure reduces Digicel's financial flexibility. In the fiscal year ending March 31, 2007, scheduled amortization will total just under $60 million and climb to over $80 million in fiscal 2008.

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