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I AGREE
04 Mar 2011
Outlook still positive
New York, March 04, 2011 -- Moody's Investors Service has assigned a Ba1 rating to MetroPCS
Wireless, Inc.'s ("MetroPCS" or "The
Company") new $1.5 billion term loan. MetroPCS
plans to amend the terms of its Ba1 rated senior secured credit facility,
increasing its size by $1.5 billion in new debt that will
mature in 2018. The company plans to use the proceeds to retire
$540 million outstanding under the credit facility that was scheduled
to mature in 2013 and to create the financial flexibility to pursue spectrum
acquisitions. Moody's has also affirmed our positive outlook,
reflecting the MetroPCS's strong performance and expected improvements
in credit profile relative to its B1 Corporate Family Rating (CFR).
MetroPCS Wireless, Inc.
Corporate Family Rating.B1
Probability of Default Rating.B1
Sr. Secured RCFBa1,
LGD-2 (19%)
Sr. Secured Term LoansBa1, LGD-2
(19%)
Sr. Unsec. Notes...B2,
LGD-5 (75%)
SGL / Short-Term Rating..SGL-1
Outlook.. Positive
RATINGS RATIONALE
Moody's has assigned a Ba1 rating to MetroPCS new $1.5
billion senior secured term loan due 2018. The new term loan will
be issued through an amendment and extension of the company's current
credit facility. The company plans to use the proceeds of the new
term loan to repay its existing $540 million outstanding senior
secured term loan due in 2013 and to position itself to have the financial
flexibility to opportunistically purchase additional spectrum assets over
the next 12-18 months. The amendment to the credit faclity
will also increase the revolving credit facility to $105 million
from $67.5 million prior and loosen the agreement's financial
covenants. Following this refinancing action, MetroPCS will
have no material debt maturities before 2016 and a cash balance exceeding
$2.0 billion.
Moody's continues to believe that MetroPCS will seek to acquire
additional spectrum capacity as it grows its subscriber base of 3G and
4G data customers. We project that the company will spend approximately
$1.0 billion over the next 12-18 months to acquire
this needed spectrum. However, this investment will offset
capital spending which would otherwise be required to increase network
density as spectrum utilization became constrained.
Moody's maintains a positive outlook on MetroPCS based on its strong
growth and lower churn despite an environment that is increasingly competitive
due in part to U.S. wireless penetration nearing 100%.
In addition to solid execution, the positive outlook reflects our
view that the company's credit metrics will continue to improve
from strong growth, low churn and stable ARPU and margins.
Moody's believes that MetroPCS's operating performance will
result in modest deleveraging and a meaningful improvement in free cash
flow. We project that leverage, measured as Debt to EBITDA
(Moody's adjusted), will increase slightly to approximately
4.0x at year-end 2011, but will fall to approximately
3x by year end 2013 as a result of EBITDA growth. Free cash flow
as a percentage of debt is projected to approximately double to 10%
during this timeframe.
Moody's Senior Vice President Dennis Saputo commented, "MetroPCS
is a mini-juggernaut, growing at a pace higher than the industry
average while transforming into a strong cash-generating business."
Moody's anticipates that MetroPCS will accumulate a significant
cash position over the next 2-3 years as capex declines and margins
expand, both at a modest pace.
MetroPCS's B1 CFR reflects the positive factors referenced above,
offset by the company's small scale and the intensely competitive
status of the wireless communications industry. MetroPCS's
price-centric strategy could be duplicated by peers, many
of which are much larger and better capitalized. Although Moody's
feels that the industry has exhibited price discipline, the potential
exists for competitors to undercut MetroPCS to gain market share while
sacrificing margins. Additionally, the network costs incurred
by the growth in data services could adversely impact profitability.
The $1.5 billion senior secured term loan is rated Ba1 (LGD-2,
19%), three notches above the company's B1 CFR due
to the senior secured status of the debt and the loss aborption offered
by MetroPCS's existing $2.0 billion of unsecured notes
(rated B2, LGD-5).
MetroPCS's rating could be moved up if the company continues on its current
growth trajectory while keeping churn and pricing stable, which
would result in rapidly increasing earnings and cash flows. Specifically,
Moody's could raise MetroPCS's rating if its leverage is likely to approach
3.0x amid stable EBITDA margins and if free cash flow were to improve
to between 5% to 10% of total debt (note that all cited
financial metrics are referenced on a Moody's adjusted basis).
Downward rating pressure could develop if the Company's leverage trends
toward 4.5x or if free cash flow falls below 2% of total
debt. In addition, lower EBITDA margins, declining
to below 30% on a sustained basis or a significant deterioration
in its liquidity profile could pressure the rating downward.
Moody's last rating action for MetroPCS was on November 5,
2010 when the company's $1.0 billion senior unsecured
notes were rated B2 and the company's outlook was revised to positive
from stable.
The principal methodologies used in this rating were Global Telecommunications
Industry published in December 2010, Loss Given Default for Speculative-Grade
Non-Financial Companies in the U.S., Canada
and EMEA published in June 2009, and Speculative Grade Liquidity
Ratings published September 2002
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
John Diaz
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 rates MetroPCS new term loan Ba1
No Related Data.
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