NII Shares Plummet to Record Low After Liquidity Warning

Shares of NII Holdings Inc., which offers Nextel mobile-phone services in Latin America, plunged 55 percent after the company said it may not be able to fulfill its financial obligations in 2015 and beyond.

NII shares tumbled to $1.15 at the close of trading in New York, the lowest on record. The company’s bonds dropped the most ever. After a net loss of 247,000 subscribers in the fourth quarter, NII will have to “significantly” improve its operating performance and consider additional options to increase liquidity to fund its business in 2015 and thereafter, the Reston, Virginia-based company said today in a statement. NII said it has adequate funding for 2014.

“These concerns regarding the company’s liquidity, in combination with the potential impact if the company cannot satisfy certain financial covenants under its existing operating company debt obligations in 2014, raise questions about the company’s ability to continue as a going concern,” NII said in the statement.

NII, which announced a restructuring in December that would cut 1,400 jobs, reported a net loss of $745.8 million, or $4.33 a share, in the fourth quarter. The company’s average monthly service revenue per subscriber, or ARPU, was $34 for 2013, down from $42 a year earlier. The company said it had $5.8 billion in debt and $2.4 billion in cash and investments at the end of 2013.

‘Shorter Runway’

“While we are confident that we can improve our business over the long-term, our recent disappointing results have significantly impacted our liquidity position,” Juan Figuereo, NII’s chief financial officer, said in the release. “We have a much shorter runway to implement our operational turnaround making it even more critical for us to deliver on our business plan for 2014 if we are to be successful.”

The company is focusing on generating growth in Brazil, NII’s largest market, where it signed an agreement to sell Apple Inc.’s iPhone 5s and 5c earlier this year, taking advantage of an upgraded 3G, or third-generation, network that allows them to offer more advanced devices.

“While the company is making good progress in Brazil, they face challenges to fund the return to growth due to balance sheet issues,” Walt Piecyk, an analyst at BTIG LLC, said in an e-mailed response to questions.

Bonds Plunge

NII’s $800 million of 10 percent senior unsecured notes due in August 2016 dropped by the most ever. The bonds fell 12.5 cents to 44.3 cents on the dollar to yield 53.4 percent at 4:12 p.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. That’s the lowest price since the notes were issued in 2010.

The bonds are rated CCC- at Standard & Poor’s and Caa2, one grade higher, at Moody’s Investors Service.

The company’s $1.45 billion of 7.625 percent senior unsecured notes due in April 2021 declined 4.5 cents to 37.5 cents on the dollar to yield 28.7 percent at 4:37 p.m., Trace data show. Earlier, the notes fell to 36 cents on the dollar, the lowest price on record.

Today’s stock drop reduced the company’s market value to about $198 million.

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