NEW YORK-Following the recent announcement that it has engaged a financial adviser to analyze its business plan, Standard & Poor’s Ratings Services lowered its corporate credit rating of Ntelos Inc. from B to CCC+ and placed the rating on CreditWatch with negative implications.
Ntelos reported that projections for continued wireless subscriber growth next year are expected to place pressure on its liquidity position and its ability to comply with bank loan financial maintenance covenants that become effective in 2003.
“The downgrading reflects the potential for the company to violate covenants under the current business plan,” said Catherine Cosentino, credit analyst at S&P. “Even though the company has been able to improve profitability at its wireless operations through aggressive expansion of its postpaid like customer base, the expected level of [earnings before interest, taxes, depreciation and amortization] improvement in the wireless business in 2003 under the current business plan is not expected to be material enough to meet financial covenants.”
S&P also noted that the business risk for regional wireless carriers such as Ntelos has increased over the past 10 months due to more aggressive marketing and pricing from nationwide carriers as well as entry into certain Ntelos markets by regional competitors.
