Moody's downgrades Digi

Moody's Investors Service said it downgraded to B1 from Ba3 the corporate family rating and to B1-PD from Ba3-PD the probability of default rating of Digi Communications NV, the parent company of RCS & RDS SA. Moody's also lowered to B1 from Ba3 the rating on the €850 million of backed fixed-rate senior secured notes, split into two tranches, €450 million due 2025 and €400 million due 2028, issued by RCS&RDS.

"The downgrade to B1 from Ba3 reflects our expectation that Digi's credit metrics will weaken over the coming 12-18 months, mainly driven by higher capex associated with its growth strategy," said Pilar Anduiza, a Moody's analyst and lead analyst for Digi, in a press release.

"While the company will operate at higher leverage levels which is reflecting of a more aggressive financial policy, the stable outlook takes into account the expected positive earnings growth, and management's track record of strong operating performance and successful execution of challenger strategy in Spain," Anduiza added.

The agency said it is forecasting Digi’s Moody's adjusted leverage will top 3.5x over the next 12-18 months because of the higher capex requirements. Capex is expected to increase to around €550 million-€600 million compared to its initial forecast of around €450 million-€500 million per year over the next two years.

The outlook remains stable.

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