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Moody's downgrades NII Holdings over Bankruptcy Concerns

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NII Holdings which operates Nextel branded services in Latin America has had its debt ratings downgraded as the company faces the possibility of falling into bankruptcy.

Moody's said that it downgraded the debt ratings on its expectation that bankruptcy filing is more likely as a result of the company's inability to find a strategic solution to extend its liquidity.

The company is currently not in compliance with certain financial covenants in its existing debt obligations which could trigger an event of default for up to $4.4 billion of debt.

The outlook remains negative for further downgrades.

Moody's said that NII's Caa2 corporate family rating reflects its weak operating performance and the high likelihood of a bankruptcy filing due to the company's inability to find a strategic solution to extend its liquidity. In addition, the company has been investing heavily into implementing its 3G network infrastructure to remedy its weak competitive position versus its larger peers. And, Moody's believes that while the company was working on upgrading its network to 3G capabilities its competitors were already moving to install 4G. In Mexico, customer service deteriorated sharply, leading to an increase in subscriber disconnects. The company faces substantial challenges in repairing its brand reputation, executing its network upgrade, solving its liquidity shortfall and negotiating amendments to its local credit facilities in Brazil and Mexico.

Given Moody's concerns about the company's high likelihood of a bankruptcy filing, a rating upgrade is not contemplated at this time. Moody's could lower NII's ratings further if the company cannot improve its weak liquidity position or if it does not change the trajectory of its operating performance.

With headquarters in Reston, Virginia, NII Holdings is an international wireless operator with about 9.4 million largely post-pay subscribers in Latin America. NII had approximately $4.14 billion in consolidated operating revenue for the LTM period ended 2Q'14 generated from a subscriber base across Mexico, Brazil, Argentina, and Chile.

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