NII Holdings Inc. (NIHD), which provides wireless services in several Latin American countries under the Nextel brand, is currently exploring several options to restructure its financial obligations.
On Aug 15, 2014, the company missed $118.8 million in coupon payment on its $800 million of 10% senior notes due Aug 2016. Nevertheless, the company has been granted a 30-day grace window to make the interest payment or face potential non-repayment claims.
Yesterday, NII Holdings agreed to sell its full equity interest in the company’s Nextel Chile unit to Fucata SA. In 2013, Nextel Chile contributed approximately 1.5% of the total revenue of the company.
At present, NII Holdings is negotiating with creditors regarding debt restructuring which include a possible debt swap or exchanging bonds for equity. At the end of the second quarter of 2014, the company had around $5.8 billion of outstanding debt.
NII Holdingsis facing severe competitive threat from America Movil S.A.B. (AMX) and Telefonica S.A. (TEF). These companies are aggressively deploying 4G wireless technologies in major Latin American markets, offering faster download speeds for smartphones.
Moreover, the company is facing serious problems with its roaming services after Sprint Corp. (S), from which it licenses the Nextel brand for Latin America, closed its iDEN network in Mexico in Jun 2014.
In Mar 2014, NII Holdingshired investment bank UBS AG as an advisory body to explore several strategic options for its future course of business. The strategies include forming a partnership with other wireless operators, disinvestment of some parts of its existing business or a merger or complete sell out of the company to any prospective buyer.
Together with its second-quarter 2014 earnings release, management announced that NII Holdings will probably file for Chapter 11 bankruptcy protection after it failed to fulfill its financial obligations.
Meanwhile, on Aug 14, 2014, a leading credit rating agency, Moody’s Investor Services had downgraded NII Holdings corporate family rating to Caa2, reflecting the company’s weak operating performance and the high likelihood of a bankruptcy filing due to NII Holdings’ inability to solve its liquidity problems. The outlook also remains negative for further downgrades. NII Holdings currently carries a Zacks Rank #4 (Sell).