TEXT-S&P Places Maxcom S.A.B. de C.V. 'CCC+' Rating On Watch Neg

Thu Dec 6, 2012 6:08pm EST

Overview

-- On December 4, a private-equity firm offered to buy 100% of Maxcom's shares, subject to several conditions including the successful exchange of Maxcom's $200 million notes due 2014.

-- We are placing our 'CCC+' corporate credit and debt ratings on Mexico-based telecommunications company Maxcom on CreditWatch with negative implications on the possibility of a distressed exchange of its notes.

-- We will resolve the CreditWatch placement as we receive more information on the transaction and on the impact of the notes exchange on the rating. Rating Action On Dec. 6, 2012, Standard & Poor's Ratings Services placed its 'CCC+' corporate credit and debt ratings on Maxcom S.A.B. de C.V. on CreditWatch with negative implications.

Rationale

The CreditWatch placement follows Maxcom's announcement of private equity firm's, Ventura's, intentions to buy all of Maxcom's outstanding Certificados de Participacion Ordinaria for MXN2.90 each (about $54.2 million in total). Maxcom's board and investors, representing 44% of outstanding stock, have approved the deal. Ventura also plans to increase Maxcom's capital by $22 million. The closing of the transaction will be subject to regulatory approvals, the sale of more than 50% of the stock, and the successful exchange of Maxcom's existing $200 million notes due 2014 for new bonds the company plans to issue.

We are uncertain about the new terms and conditions of these new bonds. We are also uncertain on the business strategy Ventura will have for Maxcom if the transaction occurs.

CreditWatch We will resolve the CreditWatch listing once the transaction is closed. Potential outcomes of the CreditWatch could be an affirmation or a downgrade. The outcome will primarily depend on our view if the exchange of the $200 million notes is distressed or not. We will analyze the implications of the new ownership, management, and Ventura's business strategy on Maxcom's business profile. However, we believe this assessment will take a longer period of time. In our opinion, while the new capital at this early stage will improve the company's liquidity, the amount is still small compared with necessary investments Maxcom must make to compete with its larger peers.

Related Criteria And Research

-- Criteria For Assigning 'CCC+', 'CCC','CCC-', And 'CC' Ratings, Oct. 1, 2012

-- General Criteria: Use of CreditWatch and Outlooks, Sept. 14, 2009

-- Key Credit Factors: Business And Financial Risks In The Global Telecommunication, Cable, And Satellite Broadcast Industry, Jan. 27, 2009

-- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008

Ratings List

CreditWatch Action

To From

Maxcom Telecomunicaciones S.A.B. de C.V.

Corporate Credit Rating CCC+/Watch Neg/-- CCC+/Negative/--

Senior Secured CCC+/Watch Neg CCC+

Recovery Rating 3

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