TEXT-S&P revises NTELOS recovery rating to '4'
Aug 14 - Standard & Poor's Ratings Services said today that said today that it revised its recovery rating on the senior secured debt at regional wireless carrier NTELOS Holdings Corp. (NTELOS) unit NTELOS Inc. to '4' from '3'. However, the change in the recovery rating does not affect either the 'BB-' issue-level rating on NTELOS' secured debt or the 'BB-' corporate credit rating. The '4' recovery rating indicates our current expectation for average (30% to 50%) recovery in the event of a payment default. (For the complete corporate credit rating rationale, see the full analysis on NTELOS, published June 22, 2012, on RatingsDirect.) The change in the recovery rating reflects our revised approach to recovery analysis of wireless carriers in our default scenarios. We estimate wireless enterprise value in a default scenario by using the greater of a multiple of projected bankruptcy emergence-level EBITDA or a discrete asset value, based on the book value of spectrum and a discounted value of network assets. In NTELOS' case, the cash flow multiple approach results in the greater valuation. As part of the revision in our methodology, we have also lowered our projected distressed EBITDA multiple for NTELOS to 4x from 5x to account for the company's limited geographic footprint as well as the substantial, and growing portion of revenues derived from its wholesale contract with Sprint. Our simulation incorporates a default occurring in 2015, reflecting a decline in revenues under the Sprint wholesale agreement (either from non-renewal or renewal under substantially less favorable terms) as well as a substantial erosion of NTELOS' retail subscriber base. (For the full recovery analysis, see the recovery report on NTELOS, to be published shortly on RatingsDirect, as well as the commentary on the revised valuation approach for wireless carriers, also to be published shortly.) RELATED CRITERIA AND RESEARCH -- U.S. Telecom And Cable Companies' Maturities Are Manageable, But Lower-Rated Issuers Face Some Liquidity Challenges, July 23, 2012 -- U.S. Telecom And Cable Companies, Strongest To Weakest, July 13, 2012 -- U.S. Telecom And Cable Ratings Should Be Stable Overall During Weak Economic Recovery, July 13, 2012 -- A Matter of Policy: U.S. Telecom Companies Maintain High Dividend Payouts, But For How Long?, May 30, 2012 -- A Matter of Policy: U.S. Cable And Satellite-TV Companies Ratchet Up Shareholder Payouts, May 16, 2012 -- Top 10 Investor Questions: U.S. Telecom and Cable Industries, May 10, 2012 -- Assessing The Four-Notch Rating Gap Between The Two U.S. Direct-To-Home Satellite Video Operators, May 9, 2012 -- Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011 RATINGS LIST NTELOS Holdings Corp. Corporate Credit Rating BB-/Stable/-- Ratings Unchanged; Recovery Rating Revised NTELOS Inc. To From Senior Secured BB- BB- Recovery Rating 4 3 Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.