NEW YORK (The Deal) -- NII Holdings (NIHD), which provides wireless services in Latin America under the Nextel brand, warned late Monday that it's likely to file for Chapter 11 protection in the "very near future."
Indeed, Friday will be a red-letter date for the Reston, Va.-based company struggling with declining revenues, operational problems and high debt, as it will be packed with events that could push NII closer to the courthouse.
The company owes roughly $118.75 million in interest payments due on Friday on its 7.875% notes, 11.375% notes and 10% notes.
Additionally, the company's forbearance agreement with certain holders of senior notes issued by subsidiaries NII Capital Corp. and NII International Telecom SCA, including hedge fund Aurelius Capital Management LP, expires the same day.
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.
NII is also facing a Friday deadline to certify to its Brazilian bank lenders that it is compliant with its debt covenants. The company has breached the net debt covenant under loans with the banks, which total $443.1 million, as of June 30, and has not yet received a waiver for the violation.
"We also continue to work with our advisers to identify and evaluate potential strategic transactions and have engaged in a series of productive discussions with holders of various series of our senior notes regarding a potential consensual restructuring of our balance sheet," NII's CFO Juan Figuereo said in a statement Monday.
NII has been working with UBS Investment Bank to explore M&A and divestiture opportunities, and Rothschild to evaluate debt refinancing or restructuring options, since March.
The company said in a regulatory filing Monday that it is 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.
The filing said equity holders will probably lose all, or substantially all, of their investment in the restructuring.
Even if NII can reach a restructuring agreement with its creditors out of court, the company expects a Chapter 11 filing will be necessary to implement the plan.
NII's quarterly report, released Monday, also noted that the company may need to file for bankruptcy protection without reaching an agreement with creditors beforehand.
NII, which provides wireless services in Brazil, Mexico, Argentina and Chile, has agreed to pay for financial and legal advisers for certain unnamed noteholders.
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. 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.
The company's average monthly service revenue per subscriber was $28 in the second quarter, down from $36 in the same quarter last year.
Aurelius served NII with a notice of default in March, claiming that certain intercompany transfers violate its bond indentures. However, the company denies that a default has occurred.
Aurelius is being advised in the NII restructuring by Blackstone Group LP and Robbins, Russell, Englert, Orseck, Untereiner & Sauber LLP's Lawrence Robbins and Donald Burke.
An Aurelius spokesman declined to comment Tuesday.
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.
Moody's Investors Service Inc. downgraded NII to Caa2 on Tuesday based on its expectation that a "bankruptcy filing is more likely as a result of the company's inability to find a strategic solution to extend its liquidity."
NII company spokeswomen couldn't be reached for comment Tuesday.