US-based NII Holdings has said it will likely be forced to file for relief under Chapter 11 of the US Bankruptcy Code because of poor financial performance and an inability to meet certain debt obligations.
In a statement on its Q2 results, NII CEO…
US-based NII Holdings has said it will likely be forced to file for relief under Chapter 11 of the US Bankruptcy Code because of poor financial performance and an inability to meet certain debt obligations.
In a statement on its Q2 results, NII CEO Steve Shindler said: “Despite the actions we’ve taken to improve our operational performance, we have fallen short in our efforts, leaving the company with a liquidity position that is not sufficient to support the business”.
The Latin America-focused mobile operator, which in March hired UBS to look at strategic alternatives for the company including a potential sale, said Chapter 11 relief will enable it to restructure its obligations on a stand-alone basis or together with one or more potential strategic transactions.
The company – which has units in Brazil, Mexico, Chile and Argentina – said it lost 77,000 subscribers in the quarter, bringing its total customer base to 9.4 million subscribers. Operating revenues were down 23% on the Q2 2013 result to US$969m. Net debt stood at US$4.8bn, while consolidated cash totalled US$1bn.
Shindler said that, despite ongoing initiatives to improve the business, it cannot continue to operate unless it restructures debt, finds a strategic solution or hits upon “some combination” of the two.
“As a result, we will need to make some key decisions in the short term to address our liquidity situation in an effort to secure the best possible path forward for our stakeholders,” he said.
CFO Juan Figuereo said the company, which operates under the Nextel brand, has plans in place to stabilise revenues and improve profitability and is taking “aggressive actions” to cut costs and deal with increasing pressure on its liquidity.
“We also continue to work with our advisors 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,” said Figuereo.
NII shifted its strategy last year to focus on its core markets of Brazil and Mexico, putting its other operations in Argentina, Chile and Peru on the market and successfully offloading the Peruvian business to Entel Chile for US$410m.
However, in March the company decided more drastic action had to be taken. In addition to UBS, it mandated Rothschild to improve its capital structure.
In late June, NII was said to be close to selling its Argentine and Chilean units for US$250m to an investor group led by Argentine media owners Sergio Szpolski and Matias Garfunkel. At the time, local media reported that Szpolski and Garfunkel, who own publisher and broadcaster Veintitres, planned to take control of Nextel Argentina and lead it into the country’s long-awaited 3G and 4G auctions later this year.
NASDAQ-listed NII has been facing stiff competition from Carlos Slim’s Mexico-based America Movil, as well as Telefonica.
