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I AGREE
10 Dec 2010
NII Capital Notes Downgraded to B2 from B1
New York, December 10, 2010 -- Moody's Investors Service has confirmed the B1 corporate family
rating (CFR) and probability of default rating (PDR) for NII Holdings
Inc., ("NII" or "the Company").
This action concludes the review for possible upgrade initiated on May
25, 2010 after NII and Grupo Televisa, S.A.B.
("Televisa") announced their intention to form a joint-venture
in Mexico. Under the agreement, Televisa was to invest $1.44
billion in cash for an initial 30% equity stake in Nextel Mexico.
The B1 rating has been confirmed following the termination of both the
contemplated joint venture and cash infusion by Televisa. The outlook
is stable.
Moody's has downgraded the rating of NII Capital Corp.'s
senior unsecured notes from B1 to B2 as a result of changes, both
actual and projected, in NII's capital structure which reduce
the loss protection beneath the senior unsecured notes and increase the
expected loss of this debt class.
Moody's has taken the following rating actions:
..Issuer: NII Holdings, Inc.
....Corporate Family Rating, Confirmed
B1
....Probability of Default Rating, Confirmed
B1
.Speculative Grade Liquidity -- SGL 1
.Outlook: Stable
..Issuer: NII Capital Corp.
. $800 Million Senior Unsecured Notes due 2016,
Downgraded B2 (LGD4 -- 61%)
. $500 Million Senior Unsecured Notes due 2019,
Downgraded B2 (LGD4 -- 61%)
RATINGS RATIONALE
NII Holding's corporate family rating reflects the company's
modest leverage, small scale and the highly competitive environment
in which it operates as well as the capital intensity of the industry.
The B1 rating also recognizes the sovereign, financial, operating
and event risk inherent in NII's Latin American target markets.
The rating is supported by NII's broad base of recurring revenues
which have grown steadily, even through a difficult economic backdrop
and the downward trend of service pricing. Additionally,
the company's exposure to the rapidly expanding markets in Mexico
and Brazil offer an opportunity to continue growth. NII's
ratings are further supported by its above average pricing and premium
service offering, which results in high margins despite small relative
market shares.
The downgrade of NII Capital's senior unsecured notes from B1 to
B2 reflects the significant liabilities, both debt and non-debt,
held at NII's operating companies and our expectation that these
liabilities will increase materially in the future since they provide
a currency hedge in addition to offering attractive economics.
Although NII Capital's senior unsecured notes are guaranteed by NII Holdings
(the parent), there are no subsidiary guarantees from the operating
companies, which limits the collateral to support the debt at NII
Capital. The senior unsecured notes at NII Capital do benefit from
loss protection offered by the unsecured convertible notes at NII Holdings.
Given NII's plans for growth and capital requirements, Moody's
anticipates that the $1.1 billion of 3.125%
convertible notes, which are scheduled to mature in June of 2012,
will be refinanced. If these notes are replaced with debt that
is structurally more senior to NII Capital's senior unsecured notes,
the loss protection offered to the NII Capital senior unsecured notes
could disappear, placing additional pressure on ratings of the unsecured
debt of NII Capital.
Moody's views NII's liquidity as good, and projects
the company will exit 2010 with over $2.0 billion in cash.
NII does not maintain a revolving credit facility, but the company
does utilize a wide array of local funding in the markets in which it
operates.
The ratings could face upward pressure if the company is able to sustain
strong operating and financial trends while continuing to address competitive
positioning concerns regarding the company's technology portfolio.
Upwards rating pressure would also be contingent on management's ongoing
commitment to a conservative capital structure. Specifically,
if the company were likely to sustain Debt to EBITDA below 3.0
times while generating free cash flow as a percentage of debt in the mid-single
digits, positive ratings pressure could develop.
Moody's would likely lower the company's rating if its subscriber growth
stalls, churn increases or pronounced EBITDA margin erosion develops
due to competitors encroaching on the company's post-pay,
PTT customer base. In addition, if the company's credit metrics
and/or cash position were to dramatically deteriorate (i.e.
Debt to EBITDA trending towards 4.0 times) due to aggressive spectrum
or asset acquisitions, its ratings could be negatively impacted.
The principal methodology used in this rating was Moody's Global Telecommunications
Industry published in December 2007.
The last rating action Moody's has made on NII was on May 25,
2010 when the company was put on review for possible upgrade.
With headquarters in Reston, Virginia, NII Holdings,
Inc. (`NII') is an international wireless operator with more than
8.5 million largely post-pay, business subscribers
that value the company's PTT service offering built from Motorola Inc.'s
(`Motorola') iDEN technology. NII had
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, and confidential and proprietary Moody's
Investors Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
New York
Dennis Saputo
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Alexandra S. Parker
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Confirms B1 CFR for NII Holdings, Inc.
No Related Data.
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