S&P Cuts NI Holdings (NIHD) to 'CCC', Outlook Negative
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Standard & Poor's Ratings Services lowered its corporate credit rating on Reston, Va.-based wireless carrier NII Holdings Inc. (Nasdaq: NIHD) to 'CCC' from 'CCC+'. The outlook is negative.
At the same time, we lowered the rating on the senior unsecured debt at NII International Telecoms S.C.A., a wholly-owned subsidiary of NII, to 'CCC-'. The '5' recovery rating is unchanged and indicates our expectation for modest (10%-30%) recovery in the event of payment default. We also lowered the rating on the senior unsecured debt at NII Capital Corp. to 'CC' from 'CCC-'. The recovery rating on this debt remains at '6', which indicates our expectation for negligible (0%-10%) recovery in the event of payment default.
"The downgrade follows the company's poor fourth-quarter 2013 results that were below our expectations, and its disclosure that its auditors have uncertainty about the company's ability to continue as a going concern," said Standard & Poor's credit analyst Allyn Arden. "NII also indicated that it will have to significantly improve its operating performance and consider other options to enhance its liquidity position to meet its financial obligations and fund its business in 2015 and beyond. Additionally, we now believe there is higher risk of the company breaching financial maintenance covenants in its various bank and vendor facilities over the next year."
The outlook is negative, based on our expectation for EBITDA losses in 2014 and ongoing free operating cash flow deficits, which will hurt the company's liquidity position and increases the risk of default on its debt obligations over the next year.
At the same time, we lowered the rating on the senior unsecured debt at NII International Telecoms S.C.A., a wholly-owned subsidiary of NII, to 'CCC-'. The '5' recovery rating is unchanged and indicates our expectation for modest (10%-30%) recovery in the event of payment default. We also lowered the rating on the senior unsecured debt at NII Capital Corp. to 'CC' from 'CCC-'. The recovery rating on this debt remains at '6', which indicates our expectation for negligible (0%-10%) recovery in the event of payment default.
"The downgrade follows the company's poor fourth-quarter 2013 results that were below our expectations, and its disclosure that its auditors have uncertainty about the company's ability to continue as a going concern," said Standard & Poor's credit analyst Allyn Arden. "NII also indicated that it will have to significantly improve its operating performance and consider other options to enhance its liquidity position to meet its financial obligations and fund its business in 2015 and beyond. Additionally, we now believe there is higher risk of the company breaching financial maintenance covenants in its various bank and vendor facilities over the next year."
The outlook is negative, based on our expectation for EBITDA losses in 2014 and ongoing free operating cash flow deficits, which will hurt the company's liquidity position and increases the risk of default on its debt obligations over the next year.
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