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Rating Action:

Moody's upgrades Digicel to B2; changes outlook to Positive

07 Jul 2008
Moody's upgrades Digicel to B2; changes outlook to Positive

Approximately US$1.9 billion of debt securities affected

New York, July 07, 2008 -- Moody's Investors Service has upgraded the corporate family rating of Digicel Group Limited ("Digicel") to B2 from B3, reflecting the faster than expected deleveraging by the company, driven largely by the success of the new market launches and reduced start up expenses in the company's Haiti and Trinidad & Tobago markets. In addition, the rating agency changed the outlook on Digicel's debt ratings to positive from stable, as Moody's expects further cash flow growth from the existing subscriber base and diminishing capital requirements as the new markets mature. In conjunction with the ratings action, Moody's upgraded the ratings on Digicel's $1.4 billion senior unsecured notes, due 2015, to Caa1 from Caa2, and the rating on the $450 million senior unsecured notes, due 2012, at Digicel Limited to B2 from B3. The company also has a $1.2 billion senior secured credit facility at its subsidiary, which Moody's does not rate.

Ratings Upgraded:

Digicel Group Limited

- Corporate Family Rating to B2 from B3

- Probability of Default Rating to B2 from B3

- $1.4 billion Senior Unsecured Notes to Caa1 (LGD 5, 82%) from Caa2 (LGD5 81%)

Digicel Limited

- $450 million Senior Unsecured Notes to B2 (LGD 3, 47%) from B3 (LGD 3, 45%)

Outlook revised to Positive from Stable

The company's growing penetration in markets outside its long-standing Jamaica operations and the EBITDA-positive contribution from the Haiti and Trinidad & Tobago markets have pushed adjusted leverage down to about 6.0x at fiscal year end March 31, 2008, using Moody's standard analytic adjustments. This is a significant improvement from the roughly 10.0x adjusted leverage Digicel carried following the recapitalization of the company's balance sheet in early 2007. The rating and the positive outlook are further supported by Digicel's leading position as the largest wireless telecommunications carrier in the Caribbean as well as its successful track record at gaining significant market share and producing solid operating results relatively quickly after new markets are launched. According to Gerald Granovsky, Moody's Vice President and Senior Analyst, "As the company reaches a critical mass of subscribers in the Pan-Caribbean region, coupled with the slowdown of the company's expansion into new markets, the strong trajectory of operating cash flow growth is expected to carry on, which may enable Digicel to reduce its leverage to about 4.0x towards the end of fiscal 2010." Nevertheless, Moody's still expects the company to consume cash to support service expansion in its territories as competition increases in Jamaica and Haiti over the next couple of years. In addition, the company's term loan facility faces scheduled amortization payments of $320 million per year, starting in the second half of calendar year 2009. The rating is also tempered by the slowing global economy and Digicel's increasing exposure to higher risk markets, such as Haiti for its cash flow growth.

Please refer to www.Moodys.com for additional research.

Incorporated in Hamilton, Bermuda, Digicel, headquartered in Jamaica, is the largest provider of wireless telecommunication services in the Caribbean.

New York
Gerald Granovsky
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Christina Padgett
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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