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NII Holdings Sells Chilean Subsidiary

Stocks in this article: NIHD

NEW YORK (The Deal) -- NII Holdings (NIHD)NIHD, which provides wireless services in Latin America under the Nextel brand, has sold its Chilean subsidiary as it continues restructuring negotiations with bondholders following a $118.8 million missed interest payment.

The Reston, Va.-based telecom company said on Monday, Aug. 18 that Fucata SA, a joint venture comprised of Argentina-based media group Grupo Veintitres, asset manager Optimum Advisors and London-based merchant bank ISM Capital LLP, agreed to acquire NII's equity stake in Nextel Chile SA.

The sale price was not disclosed.

NII skipped interest payments totalling about $118.8 million on its 7.875% notes, 11.375% notes and 10% notes on Aug. 15, but has a 30-day grace period to make up the missed payment.

NII said on Aug. 15 that it is in ongoing discussions with its senior noteholders about options to restructure those securities, "including by exchanging all or a portion of the senior notes for equity interests in, or debt securities of, the reorganized company."

The company had warned in an Aug. 11 regulatory filing that it's talking to noteholders about restructuring options, including a debt-for-equity swap that would exchange all or some of its $4.4 billion in senior notes for equity. Equity holders will most likely be wiped out, the company said.

NII is attempting to reach a restructuring agreement with its creditors out-of-court. However, the company noted on Aug. 11 that, even if it succeeds, a Chapter 11 filing will likely be necessary to enforce the plan.

NII's shares closed at 21 cents on Tuesday with a market cap of $31.31 million. The stock has sunk a long way -- nearly 92% -- since its closing price of $2.58 on Feb. 27, just before the company released a disastrous second quarter earnings report.

NII has been working with UBS Investment Bank to explore M&A and divestiture opportunities, and Rothschild Inc. to evaluate debt refinancing or restructuring options, since March.

A sale of the Chilean unit has been in the works for months.

The wireless provider's CEO Steven Shindler had said in a May 12 earnings call for the first quarter that his company was attempting to find solutions to liquidity issues "particularly related to the smaller markets of Argentina and Chile."

Argentine newspaper Clarin reported in June that two executives at Grupo Veintitres were planning a $250 million bid for the Chile and Argentina subsidiaries.

Divestitures have long been a part of NII's strategy to combat an increasingly dismal financial condition.

In August 2013, American Tower Corp. bought 2,800 of NII's wireless towers in Brazil for $413 million and also paid $398 million for almost 1,700 towers in Mexico. The deal was structured as a sale-leaseback that provided funds for NII's 3G networks in Mexico and Brazil, its largest markets.

Later that month, NII sold its Peruvian operations to Empresa Nacional de Telecomunicaciones SA for $400 million.

The company has faced subscriber losses and shrinking revenues, and its debt load has proved to be too large for its balance sheet.

NII International Telecom SCA, the company's international subsidiary, has $700 million in 7.875% senior unsecured notes due Aug. 15, 2019 (announced May 16, 2013), and $900 million in 11.375% senior unsecured notes due Aug. 15, 2019 (announced Feb. 11, 2013).

NII Capital Corp., the company's domestic subsidiary, has $1.45 billion in 7.625% senior unsecured notes due April 1, 2021 (announced March 24, 2011); $500 million in 8.875% senior unsecured notes due Dec. 15, 2019 (announced April 5, 2010); and $800 million in 10% senior unsecured notes due Aug. 15, 2016.

As of June 30, NII had $5.8 billion in debt and $1 billion in consolidated cash.

The company reported a $629 million net loss on $969 million in revenues during the second quarter ending June 30. The company's revenue declined 23% compared to the same quarter last year.

In the past year, its wireless customer base has shrunk by 6%, losing 77,000 customers in the second quarter to end with a 9.4 million subscriber base.

As of June 30, NII wasn't in compliance with some of the covenants under its equipment financing agreements in Brazil and Mexico, or its Brazilian bank loans. The equipment financing lenders have waived the relevant covenants through the next measurement date on Dec. 31, but the Brazilian bank lenders have not waived the violation.

If any of the company's bank lenders opt to accelerate their debt, senior noteholders holding at least 25% of their class of note debt would be eligible to declare a default under their bond indentures and demand immediate repayment.

A spokesman for NII didn't return calls for comment on Tuesday.

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