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Business News/ News / Wom Bonds Tumble as Traders Rush for Exit on Restructuring Fears
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Wom Bonds Tumble as Traders Rush for Exit on Restructuring Fears

Bonds from mobile operator WOM Chile collapsed as Moody’s Ratings cut the company’s credit score deeper into junk as it struggles to convince investors it can manage a $348 million bond payment due in November.

Wom Bonds Tumble as Traders Rush for Exit on Restructuring FearsPremium
Wom Bonds Tumble as Traders Rush for Exit on Restructuring Fears

(Bloomberg) -- Bonds from mobile operator WOM Chile collapsed as Moody’s Ratings cut the company’s credit score deeper into junk as it struggles to convince investors it can manage a $348 million bond payment due in November. 

The 2024 notes plummeted 17 cents to trade at 60.5 cents, while bonds due in 2028 plunged 27 cents to 30 cents on the dollar over the past two days, according to Trace data. The trades were among the first in two weeks and came after local newspaper Diario Financiero reported the company was weighing several options — including potentially assets sales or a restructuring — as it deals with claims from suppliers and the upcoming payment. The news outlet cited sources it didn’t identify. 

Moody’s then slashed WOM’s score by two notches to the third-lowest score after the news on Wednesday, citing the increasing odds of a restructuring or distressed exchange unless the company can sell assets or get fresh financing from shareholders.

In a statement, the company said its options to refinance the 2024 bond have taken longer than expected but it is still analyzing alternatives to meet the obligation before November. What’s more, it said some of the claims from providers cited by Diario Financiero had been withdrawn. 

Moody’s decision came after S&P Global Ratings and Fitch Ratings downgraded the company on the same rationale last week. 

Bond prices had held up as executives told investors for the past year that they were in talks with banks for a loan to refinance the debt. Creditors expected an update in an earnings call scheduled for Thursday, but this week the company pushed it back indefinitely along with the release of its fourth-quarter financial results.

“The prospect of a judicial restructuring significantly reduces the likelihood that WOM will arrive at a quick solution for the 2024 notes, and could also entail a lengthy delay in releasing the fourth-quarter numbers," Sebastian Hofmeister, who follows the company for Lucror Analytics, wrote in a Thursday note, recommending clients sell the company’s bonds.

The optimism also came as some holders counted on support from the company’s parent  — private equity firm Novator Partners LLC founded by Icelandic businessman Thor Bjorgolfsson. In fact, WOM hired Rothschild last year to help it refinance its debt, it said in November. 

WOM has been struggling with competition across the region. It has about a fifth of the market share for mobile lines in Chile, topped only by Movistar and Entel SA, according to data through September collected by the local regulator. Carlos Slim’s Claro has the fourth place.   

--With assistance from Giovanna Bellotti Azevedo.

More stories like this are available on bloomberg.com

©2024 Bloomberg L.P.

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Published: 22 Mar 2024, 12:06 AM IST
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