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 millionsenior secured term loan facility due 2019. The company will use proceeds torefinance the approximately $460 million outstanding on the current term loanwhich matures in 2015. The recovery rating of '4' indicates our expectation foraverage (30% to 50%) recovery of principal in the event of a payment default andreflects our revised approach to estimating wireless enterprise value in adefault scenario by using the greater of a multiple of projected bankruptcyemergence-level EBITDA or a discrete asset value, based on the book value ofspectrum and a discounted value of network assets. In NTELOS' case, the cashflow multiple approach results in the greater valuation. Our projecteddistressed EBITDA multiple for NTELOS is 4x and recognizes the company's limitedgeographic footprint as well as the substantial, and growing reliance on awholesale contract with Sprint Spectrum L.P. Our `BB-' corporate credit ratingson NTELOS are not affected by the refinancing. The $35 million revolving creditfacility ('BB' issue-level rating) will be terminated as part of therefinancing.
Our ratings on NTELOS recognize the limited scale and geographic diversity ofits wireless properties; intense competition from national and prepaidcarriers; the characteristically higher churn of its prepaid customers whichaccount for about a third of NTELOS' retail wireless customer base. As aregional wireless carrier, NTELOS is at a disadvantage compared with nationalcarriers' given the latter's scale economies, superior access to popularwireless devices, and the ability to carry traffic nationwide largely on theirown--not leased--network. A favorable rating consideration is the goodvisibility on the material, and growing, portion of revenue and cash flow fromNTELOS' strategic alliance with Sprint Spectrum L.P. under which NTELOS is theexclusive personal communication services provider to Sprint's CDMA customersin NTELOS' western Virginia and West Virginia service areas. However, giventhe increasing importance of the Sprint relationship, the potential that thecontract might not be renewed after July 2015 is a material risk.
(For the corporate credit rating rationale, see the summary analysis on NTELOSpublished on June 22, 2012.)
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RATINGS LISTNTELOS Holdings Corp.NTELOS Inc.Corporate Credit Rating BB-/Stable/--New RatingNTELOS Inc.
$475 Mil. Sr. Sec. Term Ln Due 2019 BB-
Recovery Rating 4
Complete ratings information is available to subscribers of RatingsDirect onthe Global Credit Portal at
. All ratings affectedby this rating action can be found on Standard & Poor's public Web site at. Use the Ratings search box located in the leftcolumn.(New York Ratings Team)