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Digi Outlook Downgraded By S&P; EUR Spreads Up To 10bps Wider On The Day

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New Profile: B1/BB-[N]


• DIGI faces liquidity risk with a EUR 450mn bond due in Feb 25 not yet refinanced, forcing a downgrade to "less than adequate" liquidity. S&P believe Digi is willing and able to repay the bond but estimate that available cash will just about cover estimated uses over the coming year (had seen cash at 1.2x uses before).

• S&P note that Digi are exploring liquidity options like asset sales, additional credit lines, or new debt to manage the EUR 450mn bond. Roughly half of Digi’s CapEx forecast are described as discretionary.

• They anticipate solid op performance with 10% annual revenue growth in 2024-2025, mainly from gains in Spain, though high investments and profitability impacts from the Spanish expansion are expected.

• S&P see a temporary peak in EBITDA leverage at 3.5x while FOCF will remain slightly negative. Downgrade thresholds given at EBITDA leverage above 3.5x and FFO to Debt below 20%. An outlook upgrade is possible if the company addresses its liquidity position so that sources cover uses by at least 1.2x again.

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