Financial Diary – Santiago
The S&P Global rating agency became the latest to downgrade its rating on WOMthus continuing to immerse itself in speculative investment territory, in view of the challenges presented by its desire to refinance a bond maturing at the end of the year.
“S&P Global Ratings downgraded WOM's issuer credit rating from 'B' to 'CCC'. TWe have also downgraded the issue-level rating of the senior unsecured notes issued by the financing vehicle Kenbourne Invest SA from 'B' to 'CCC' (and guaranteed by WOM)”, the agency announced this Wednesday.
To this he added that “The negative outlook reflects the possibility that we could further downgrade the ratings if we see a continued lack of progress in the ongoing refinancing and, therefore, an increasing probability of debt restructuring.
In this way, it joins the rest of its peers who have given similar notes to the telecommunications firm.. Moody's downgraded its rating on WOM's bonds to Caa1 in October last year, while Fitch cut it to B- the following month.
The main argument behind S&P Global's decision is that WOM would be facing significant short-term refinancing risk, as its senior unsecured notes with a principal amount of US$348 million mature in November 2024.
“The company's management has been working on the refinancing for about a year. Negotiations with the banks are taking longer than expected and the outcome of this refinancing exercise remains uncertain, taking into account the difficult market conditionswith limited investor appetite and very high debt costs for entities subject to financial pressures,” the statement says.
The C rank in debt rating points to a poor credit quality of the company, which implies probabilities of some type of default. For this reason, it is a speculative investment with high risk for those who wish to become lenders of the company that falls into this category.
S&P anticipated that “eIn the absence of a favorable evolution of financing, WOM could propose a debt restructuring that we would classify as a distressed exchangeand would be equivalent to non-payment depending on its conditions”.
“The downgrade in our rating is primarily due to financing options taking longer than expected. We are analyzing other alternatives to achieve the refinancing of our bond before its maturity in November 2024, and once this materializes our rating could be reviewed again. “This downgrade is expected not to impact our operating results, as was the case with the previous downgrade by Moody's in November 2023,” he said. WOM to DF through a written statement.
Before the expiration and payment of the last coupon at the end of this year, WOM must pay interest on May 26 for the debt security it seeks to refinance. Kenbourne Invest has offered another dollar bond of US$290 million in circulation and maturing in 2028, whose next interest payment is scheduled for July.
