Hedge fund Aurelius Capital Management LP asked NII Holdings Inc. (NIHD) to reaffirm obligations under debt guarantees, saying the provider of Nextel mobile phone services in Latin America violated bond terms.
Aurelius, based in New York, said in a March 4 letter to NII that was obtained by Bloomberg News that inter-company equity transfers in 2009, which resulted in the release of debt guarantees, ran afoul of bond indentures. Certain inter-company transactions done in connection with sale of notes in 2013 by NII International Telecom SCA also may have constituted fraudulent transfers, Aurelius said.
Buffeted by customer defections amid delayed rollouts of its third-generation cellular networks in Brazil and Mexico as it moves away from push-to-talk services, NII posted its seventh straight quarterly loss last week, triggering rating cuts by Standard & Poor’s and Moody’s Investors Service. Aurelius funds hold more than 25 percent of NII’s $500 million of 8.875 percent notes due 2019 and a “significant percentage” of NII’s $800 million of 10 percent bonds due 2016, according to the letter.
“While we wish these concerns to be promptly and suitably resolved, rest assured we have no desire to exacerbate NII’s financial stress if that can be avoided,” Aurelius said in the letter, which was signed by ChairmanMark Brodsky.
NII’s shares have plunged 59 percent to $1.13 this year. Its 8.875 percent 2019 bonds are trading at 48.25 cents on the dollar, according to Trace, the bond price reporting system of the financial industry regulatory authority.
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