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Global Credit Research - 24 Mar 2011
NII Holdings B1 CFR Affirmed
New York, March 24, 2011 -- Moody's Investors Service has assigned a B2 rating to NII Capital
Corp.'s ("NII Capital") proposed new $500
million senior unsecured note offering. Moody's has affirmed
the B1 corporate family rating (CFR) of NII Holdings, Inc.
("NII Holdings"), parent of NII Capital. The
outlook is stable.
Moody's has taken the following rating actions:
..Issuer: NII Capital Corp.
. $500 Million New Senior Unsecured Notes due 2021,
Assigned B2 (LGD4 -- 67%)
The following LGD Assessments have changed:
..Issuer: NII Capital Corp.
. $800 Million Senior Unsecured Notes due 2016,
B2 (LGD4 -- 67% vs. LGD4 -- 61% prior)
. $500 Million Senior Unsecured Notes due 2019,
B2 (LGD4 -- 67% vs. LGD4 -- 61% prior)
The following ratings are unchanged:
..Issuer: NII Holdings, Inc.
....Corporate Family Rating: B1
....Probability of Default Rating: B1
.Speculative Grade Liquidity: SGL 1
NII Holding's B1 corporate family rating reflects the company's
modest leverage, small scale and the highly competitive environment
in which it operates as well as t!he 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 pressure on 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 LGD assessment of NII Capital's senior unsecured notes 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 is guaranteed by NII Holdings (the parent),
there is no subsidiary guarantee 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 convertible notes are replaced with debt
that is structurally more senior, the loss protection offered to
the NII Capital senior unsecured notes could disappear, placing
additional pr! essure on ratings of the unsecured debt of NII Capital.
Moody's views NII's liquidity as good, and projects
the company will exit 2011 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
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 times while
gener! ating 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 rating NII was Moody's Global Telecommunications
Industry, published in December 2010 and availab! le on www.moodys.com.
Other methodologies and factors that may have be en considered in the
process of rating this issuer can also be found in the Rating Methodologies
sub-directory on Moody's website.
The last rating action Moody's has made on NII was on December 10,
2010 when the company's CFR was confirmed after conclusion of Moody's
review for possible upgrade.
With headquarters in Reston, Virginia, NII Holdings,
Inc. (`NII') is an international wireless operator with more than
9 million largely post-pay, business subscribers that value
the company's PTT service offering built from Motorola Inc.'s (`Motorola')
iDEN technology. NII had approximately $5.6 billion
in revenue for the LTM period ended Q4'10 generated from a subscriber
base ac! ross Mexico, Brazil, Argentina, Peru,
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.
Senior Vice President
Corporate Finance Group
Moody's Investors Service
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's Rates NII Capital New Notes B2
250 Greenwich Street
New York, NY 10007
No Related Data.
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