TEXT-S&P assigns 'BB-' rating to NTELOS term loan
Oct 11 () - Standard & Poor's Ratings Services today assigned its 'BB-' rating to Waynesboro, Va.-based regional wireless carrier NTELOS Holdings Corp.
(NTELOS; BB-/Stable/--) subsidiary NTELOS Inc.'s proposed $475 million senior secured term loan facility due 2019. The company will use proceeds to refinance the approximately $460 million outstanding on the current term loan which matures in 2015. The recovery rating of '4' indicates our expectation for average (30% to 50%) recovery of principal in the event of a payment default and reflects our revised approach to estimating wireless enterprise value in a default scenario by using the greater of a multiple of projected bankruptcy emergence-level EBITDA or a discrete asset value, based on the book value of spectrum and a discounted value of network assets. In NTELOS' case, the cash flow multiple approach results in the greater valuation. Our projected distressed EBITDA multiple for NTELOS is 4x and recognizes the company's limited geographic footprint as well as the substantial, and growing reliance on a wholesale contract with Sprint Spectrum L.P. Our `BB-' corporate credit ratings on NTELOS are not affected by the refinancing. The $35 million revolving credit facility ('BB' issue-level rating) will be terminated as part of the refinancing.
Our ratings on NTELOS recognize the limited scale and geographic diversity of its wireless properties; intense competition from national and prepaid carriers; the characteristically higher churn of its prepaid customers which account for about a third of NTELOS' retail wireless customer base. As a regional wireless carrier, NTELOS is at a disadvantage compared with national carriers' given the latter's scale economies, superior access to popular wireless devices, and the ability to carry traffic nationwide largely on their own--not leased--network. A favorable rating consideration is the good visibility on the material, and growing, portion of revenue and cash flow from NTELOS' strategic alliance with Sprint Spectrum L.P. under which NTELOS is the exclusive personal communication services provider to Sprint's CDMA customers in NTELOS' western Virginia and West Virginia service areas. However, given the increasing importance of the Sprint relationship, the potential that the contract might not be renewed after July 2015 is a material risk.
(For the corporate credit rating rationale, see the summary analysis on NTELOS published on June 22, 2012.)
RELATED CRITERIA AND RESEARCH
-- Criteria For Assigning 'CCC+', 'CCC','CCC-', And 'CC' Ratings, Oct. 1, 2012
-- Business Risk/Financial Risk Matrix Expanded, Sept. 18, 2012
-- U.S. Telecom And Cable Companies' Maturities Are Manageable, But Lower-Rated Issuers Face Some Liquidity Challenges, July 23, 2012
-- A Matter of Policy: U.S. Telecom Companies Maintain High Dividend Payouts, But For How Long?, May 30, 2012
-- A Matter of Policy: U.S. Cable And Satellite-TV Companies Ratchet Up Shareholder Payouts, May 16, 2012
-- Top 10 Investor Questions: U.S. Telecom and Cable Industries, May 10, 2012
-- Assessing The Four-Notch Rating Gap Between The Two U.S. Direct-To-Home Satellite Video Operators, May 9, 2012
-- Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011
RATINGS LIST NTELOS Holdings Corp. NTELOS Inc. Corporate Credit Rating BB-/Stable/-- New Rating NTELOS Inc.
$475 Mil. Sr. Sec. Term Ln Due 2019 BB-
Recovery Rating 4
Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at
. All ratings affected by this rating action can be found on Standard & Poor's public Web site at . Use the Ratings search box located in the left column. (New York Ratings Team)