Vodafone Loan Default Row

Standard & Poor's Ratings Services has stated that its rating on Western Wireless Corp. (B-/Positive/--) is not affected by the events highlighted in the company's recently filed Form 8-K, related to the term loan made available to its Austrian subsidiary, tele.ring Telekom Services, by Vodafone Group.

Vodafone is claiming that tele.ring has violated certain terms of the loan agreement. There was US$197.3 million (plus US$17 million of accrued interest) outstanding under the term loan as of Sept. 30, 2004.

Vodafone alleges that an event of default occurred, granting it the right to accelerate the maturity of the tele.ring loan (such default would cause a cross-default under Western Wireless' domestic $1.55 billion senior secured credit facility and other debt). Given Western Wireless' consolidated cash balance of $283 million as of Sept. 30, 2004, free cash flow generation, and good access to the capital markets, it is likely that the company could satisfy the tele.ring claim without a substantial adverse effect on its financial stability. If Western does satisfy the claim, debt leverage (debt to annualized EBITDA for Western's domestic operations in third-quarter 2004) would increase to 4.6x from 4.2x -- not significant enough for Standard & Poor's to revise its rating on the company. Furthermore, financial results for Western's international operations have improved over the past year and are generating free cash flow."

Posted to the site on 29th December 2004