NEW YORK-Saying Teletrac Inc. faces “numerous competitive alternatives” to its wireless location services for commercial vehicles, Standard & Poor’s Corp. lowered speculative grade ratings Aug. 7 on $135 million of the company’s debt.
Kansas City, Mo.-based Teletrac purchased Federal Communications Commission 900 MHz licenses for location and monitoring services in early 1996 from an AirTouch Communications Inc. partnership. As of early this year, the company had about 70,000 users of its non-satellite-based services.
In August 1997, Teletrac said it sold a $105 million issue of 10-year senior subordinated notes, partly to help build out its systems. One year later, S&P has lowered to CCC+ from B- its rating on that debt, as well as on a $30 million revolving credit facility.
“Teletrac continues to face the challenge of growing its commercial … business in the face of numerous competitive alternatives, including paging, cellular and enhanced specialized mobile radio offerings,” said Catherine Cosentino, an analyst for Standard & Poor’s.
“Moreover, the company’s consumer vehicle location service has extremely limited prospects, given its limited penetration to date.”
The rating agency also placed Teletrac’s debt on CreditWatch with negative implications.
“The CreditWatch placement reflects concerns about Teletrac’s near-term liquidity in light of its relatively limited customer growth and associated service revenue expansion during the last 18 months, despite market expansion into a total of 11 markets.
“While expansion into the New York market later this year will increase Teletrac’s overall potential customer base, entry start-up costs exacerbate near-term liquidity concerns.”
The company’s cash balances of just $15 million at June 30 aren’t likely to “provide adequate funding of capital and operating requirements beyond the next few months,” Cosentino said.
Teletrac is negotiating a “financing package to cover such needs,” she noted.
However, she added, “It is not clear (whether) the company’s core commercial vehicle location and messaging business will penetrate markets sufficiently over the next year to support ongoing operations.”
