Maxcom Telecomunicaciones S.A.B. de C.V. Upgraded To 'CCC' From 'SD' After Debt Repurchase; Outlook Negative

  • We've reassessed our issuer credit rating on Mexican integrated telecommunications services operator Maxcom Telecomunicaciones S.A.B. de C.V. (Maxcom) after the company repurchased $8 million of its outstanding senior secured step-up notes due June 2020 at substantially below par.
  • MEXICO CITY (S&P Global Ratings) April 5, 2019--S&P Global Ratings raised the issuer credit rating on Maxcom to 'CCC' from 'SD' (selective default). At the same time, we raised our issue-level ratings on the remaining outstanding amount of the company's senior secured step-up notes to 'CCC' from 'D'. Our recovery rating on the notes is unchanged at '4'.
  • The negative outlook reflects the fact that we could lower our ratings to 'CCC-' if the company isn't able to refinance its notes before December 2019.
The rating action reflects that we've reassessed the issuer credit rating 
after Maxcom repurchased $8 million of its outstanding senior secured step-up 
notes due June 2020, reaching a repurchase of 41.2% of the total issued amount 
as of April 2019. The company purchased below par at $59.75 per every $100.00 
fair value, and then cancelled these repurchased notes. Maxcom was able to 
repurchase these notes with cash in hand. We expect the company's credit 
metrics to remain weak, with debt to EBITDA remaining close to 7.0x this year, 
because in our view, the repurchase doesn't represent an improvement in 
leverage metrics or in the pressure on the maturity schedule.

The rating reflects Maxcom's weak credit metrics, low EBITDA margins, and 
uncertainty about the sustainability of its business model because the company 
has struggled to grow in the past few years. Therefore, we believe that Maxcom 
is likely to default without an unforeseen positive development or to consider 
an additional distressed exchange offer or redemption in the next 12 months. 

The negative outlook reflects the high likelihood that Maxcom will experience 
a default event in the next 12 months to address the long-term sustainability 
of its capital structure. Additionally, we could lower the rating if the 
company continues repurchasing notes below par, which we could view as a 
distressed exchange according to our criteria.
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