Yesterday, NII Holdings Inc. (NASDAQ: NIHD), which provides wireless services in several Latin American countries under the Nextel brand, filed chapter 11 proceedings under the U.S. Bankruptcy Code for the Southern District of New York. Along with its second-quarter 2014 earnings release, management had voiced apprehensions of a Chapter 11 bankruptcy filing if it fails to fulfill its financial obligations. At the end of the second quarter of 2014, the company had around $5.8 billion of outstanding debt.
On Aug 15, 2014, the company missed $118.8 million in coupon payment on its $800 million of 10% senior notes due Aug 2016. NII Holdings sold its full equity interest in the company's Nextel Chile unit to Fucata SA. In 2013, Nextel Chile contributed approximately 1.5% of the total revenue of the company.
NII Holdings is facing severe competitive threats from America Movil S.A.B (NYSE: AMX) and Telefonica S.A. (NYSE: TEF). These companies are aggressively deploying 4G wireless technologies in major Latin American markets, offering faster download speeds for smartphones. Moreover, the company is facing serious problems with its roaming services after Sprint Corp. (NYSE: S), from which it licenses the Nextel brand for Latin America, closed its iDEN network in Mexico in Jun 2014.
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Meanwhile, on Aug 14, 2014, a leading credit rating agency, Moody's Investor Services had downgraded NII Holdings corporate family rating to Caa2, reflecting the company's weak operating performance and the high likelihood of a bankruptcy filing due to NII Holdings' inability to solve its liquidity problems. The outlook also remains negative for further downgrades. NII Holdings currently carries a Zacks Rank #4 (Sell).
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