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PR Wireless: Moody’s Withdraws Ratings

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NEWS

On January 23, 2018 Moody’s announced the withdrawal of its ratings on PR Wireless, a portfolio company of  CM Finance (CMFN) and Great Elm Corporation (GECC). Here’s what Moody’s said:

Moody’s has decided to withdraw the ratings because it believes it has insufficient or otherwise inadequate information to support the maintenance of the ratings. …

In November 2017, PR Wireless (doing business as Open Mobile) and Sprint Corporation (B2 stable) finalized a joint venture whereby PR Wireless has combined its business with that of Sprint in Puerto Rico and in the US Virgin Islands. The new joint venture is now consolidated in Sprint’s accounts.

PR Wireless is a leading wireless communications company in Puerto Rico, established in June 2007.

The rating group had  a “Caa2 corporate family rating, Caa2-PD probability of default rating, as well as the Caa2 senior secured rating on its term loan and revolving credit facility”  on PR Wireless.

However, back in November 2017 Sprint and PR Wireless (which does business as Open Mobile) merged in a JV, where the former has a 55% voting interest and the latter 45%. The economic interest is 72/28.

Apparently Moody’s has not received enough information about what is happening in that hurricane flattened island to this new venture to maintain coverage.

VIEWS

The BDC Reporter does not know what to make either of the JV or the Moody’s withdrawal.

We can report, though, that CMFN and GECC each have senior loans to PR Wireless at September 2017 with a cost of $15.6mn and $8.9mn respectively. Both BDCs valued the debt at close to par.

CMFN also has $1.4mn of equity invested in PR Wireless, but that’s been written down to zero.

Before the merger – as reflected in the Moody’s ratings – there was some serious uncertainty about the creditworthiness of the business.

Now any valuation of the credit risk -given that the JV has been consolidated into Sprint’s financials – is well nigh impossible.

Given the relatively large size of the loans made by both CMFN and GECC this is a story the BDC Reporter will keep watching closely.

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