PR Wireless and Others Feel Financial Effects of Hurricane Maria

As almost half of Puerto Rico's population remains without cell phone service, and many more without power, the company that provides some of that coverage is experiencing financial distress.

PR Wireless Inc., which operates as Open Mobile, generates 100% of its revenue in Puerto Rico, where Hurricane Maria damaged much of the commonwealth's wireless infrastructure and electrical grid, along with many other utilities.

"There were some damages to the telecom infrastructure but on top of that you also have the power," Moody's analyst Marie Fischer-Sabatie said Friday. "The recovery of the telecom network is to an extent related to the the recovery of the power," she said, explaining that both need to be operational.

As of Oct. 19, 61% of telecommunications had been restored, according to the U.S. Federal Emergency Management Agency, but only 21% had power, according to Puerto Rico's governor.

With this, the company is experiencing revenue disruption, damage to its assets and has little cash -- just $10 million plus another $10 million in revolving credit -- to recover, according to Moody's Investors Service.

Although the company will likely receive some help from its insurers and the U.S. Federal Communications Commission, "this may not be sufficient to fully alleviate liquidity concerns," Moody's said, downgrading the company on Oct. 17 to Caa2 with a negative outlook.

The rating firm said it was skeptical that there would be any positive pressure on PR Wireless's rating in the near future, due to the extent of the damage caused by the hurricane. However, a joint venture with Sprint Corp., which was announced earlier this year, could help PR Wireless, the fourth-largest wireless provider in Puerto Rico.

PR Wireless was formed in 2007 after the bankruptcy of MoviStar Inc. The company didn't respond to request for comment.

Hurricane Maria struck Puerto Rico on Sept. 20, only a few weeks after Hurricane Irma -- another massive storm -- hit the northeast part of the island. The U.S. Virgin Islands have been similarly devastated.

In addition to PR Wireless -- and the millions of residents suffering under the harsh conditions -- the profound damage to these territories has the potential to affect a wide swath of businesses and governmental entities, according to an earlier Moody's report.

On Oct. 2 Moody's noted that financial conditions for Puerto Rico and the U.S. Virgin Islands were already vulnerable when the hurricanes struck.

"While the humanitarian cost and full magnitude of the damage are still unknown, it is clear that the hurricanes will have a significant effect on the local economy and the financial condition of some rated issuers.... Damage to infrastructure and a potential increase in outmigration resulting from the storms will hamper economic activity. The important tourism industries in the Virgin Islands and Puerto Rico have been hurt and will take time to recover."

In addition to Puerto Rico's electric authorities, PREPA and AES, the Virgin Islands Water and Power Authority is in the process of restoring electrify to customers that lost it during the hurricanes. The authority has weak internal liquidity and limited cash on hand or other resources to finance capital expenditures, Moody's said. However, the rating agency added, that its debt service is fully-funded.

Liberty Cablevision of Puerto Rico LLC is another telecom company there, and faces challenges similar to those of PR Wireless. The effect of the storm on Liberty's credit, currently B3 with a stable outlook, will depend on the pace of power repairs and the extent of infrastructure damages, Moody's said.

The operator of Puerto Rico's San Juan Luis Munoz Marin Airport and the operator of two toll roads in Puerto Rico were placed on review for downgrade from Ba2 and Ba3, respectively after Hurricane Maria, Moody's said. The companies, Aerostar Airport Holdings LLC and Metropistas, were each able to resume operations nearly right away, despite some damage. For Aerostar, agreements with airlines that set a floor for payments to the airport will help offset reduced operations, Moody's said. However, traffic could remain low for Metropistas, which does have liquidity available.

Recently, Aerostar said in a press release that "airport management is evaluating damages to airport infrastructure and does not have a reasonable estimate yet. Airport infrastructure is insured against material damages with a maximum deductible of US$10 million."

A representative for Aerostar's parent company Aeropuertos Del Sureste confirmed that $10 million is its maximum amount it will have to bear, but didn't comment further.

Metorpistas didn't respond to a request for comment but on its website said that as of Sept. 24 it had reopened PR-22 and PR-5 and began collecting tolls. The Express Rail remained closed.

Limetree Bay Terminals LLC, rated Ba3 with a stable outlook, is an oil terminal located on the island of St. Croix. The facility wasn't damaged, but it's possible that fewer ships visit the terminal now, Moody's said.

Two Puerto Rican universities, University of Puerto Rico, rated Ca with a negative outlook, and University of the Sacred Heart, rated Baa3 with a negative outlook, have suspended classes -- forcing them to refund tuition or pay for the students to transfer. Moody's said the class cancellation could result in a permanent drop in enrollment if students choose not to return to the institutions. Each has limited liquidity, Moody's said.

Finally, financial institutions that operate in Puerto Rico -- Banco Santander Puerto Rico (BSPR A2/Baa2 stable, ba3), Popular Inc. (Popular Ba2/B2 stable, b1) and FirstBank (FBP B1/Caa1 stable, b3) -- could experience credit losses, depending on insurance coverage of Puerto Rican residents and government aid to those residents as the damage from the hurricanes has impacted the homes and businesses of banks' retail and commercial clients. However, each of these banks have already responded to Puerto Rico's economic recession by improving their capital and liquidity positions, raising equity and streamlining operations, Moody's said, leaving them well-positioned to handle any hurricane-related trouble.

None of these companies responded to request for comment.

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