Difficult times: The control room that remotely operates the Gemini South Observatory in La Serena, Chile, is all digitally lit up. Things are not looking so good for WOW Chile with the telco’s talks with banks to lock in funding have dragging out for a year. — AFP
SANTIAGO: WOM Chile, once a rising telecom startup that the bond market couldn’t get enough of, now has investors searching for answers about how it plans to refinance US$348mil in debt due this year.
The mobile operator stunned bondholders this week by delaying the release of its fourth-quarter results and accompanying conference call, set for today, without rescheduling it. Indicative pricing shows bids for 2024 notes at 68 US cents on the dollar, down from 75 US cents last Friday.
The decision, which the company didn’t explain, came days after S&P Global Ratings and Fitch Ratings cut the company’s credit score deeper into junk, citing higher odds of a restructuring.
Talks with banks to lock in funding have dragged out for a year or so.
Cutthroat competition weighing down the telecom sector in Latin America has drained the company’s coffers. It last reported cash of just US$9.5mil.
Creditors aren’t counting on the company’s backer, Icelandic businessman Thor Bjorgolfsson, to come to the rescue.
“Chances of a happy ending with solid refinancing are slim,” said Eduardo Ordonez, portfolio manager at BI Asset Management in Copenhagen, who used to own the credit but sold his holdings.
“Some support from shareholders would be needed to stabilise the story, but that doesn’t seem likely.”
WOM said in a statement last week that it was analysing options to pay back bondholders without providing additional details. The company hired Rothschild last year to help it refinance its debt coming due this year.
A representative for WOM didn’t respond to multiple requests for comment after the earnings were pushed back.
“Weirdly, the bond price has held up,” said Juan Djivelekian, an analyst at Balanz Capital Valores.
“They have a big upcoming maturity and no clear way to pay for it.”
The company’s 2024 bonds last traded at 77 US cents on March 7, according to Trace data, though indicative data compiled by Bloomberg showed the notes trading lower.
The company’s 2028 debt last changed hands at about 55 US cents per dollar.
WOM has about a fifth of the market share for mobile phones in Chile, topped only by Movistar and Entel SA, according to data collected in September by the local regulator.
Carlos Slim’s Claro is in fourth place.
The “strong price wars” between carriers in the region have helped sour sentiment in the crowded, cash-intensive industry, said Ordonez.
In Latin America, the sector is dominated by some of the world’s wealthiest, like Slim, French businessman Xavier Niel and American billionaire John Malone.
It’s all a long way from the flamboyant start of the company back in 2015.
WOM, which stands for “word of mouth,” came about after Bjorgolfsson’s private equity fund, Novator Partners LLP, acquired Nextel Chile.
It then became known for its unconventional advertising campaign, which often poked fun at its more staid rivals.
In 2022, the company used part of the US$930mil in proceeds from the sale of transmission towers in Chile to buy shares in its sister Colombian operation and pay dividends to its owner.
“You’d think if the shareholders wanted to support the company, they’d have had ample time,” BNP Paribas strategist Alexis Panton said. “But there haven’t been any public signs of parental support.”
In the event of default, recovery values may hover around 20-something US cents per dollar, Panton wrote in a note Monday.
“I don’t think they will go to straight default,” said Omotunde Lawal, a portfolio manager at Baring Investment Services Limited.
“A distressed exchange seems a more likely compromise.” — Bloomberg
