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Technology Stocks : Qualcomm Moderated Thread - please read rules before posting -- Ignore unavailable to you. Want to Upgrade?

To: John Biddle who wrote (28977)	11/15/2002 11:42:10 PM
From: John Biddle	Read Replies (1) \| Respond to of 197032

Moody's cuts Iusacell ratings to C Reuters, 11.15.02, 12:58 PM ET forbes.com (The following press release was provided by the rating agency) NEW YORK, Nov 15 - Moody's downgraded Grupo Iusacell's senior unsecured and issuer ratings to C from Caa2. Moody's also downgraded Grupo Iusacell Celular's senior unsecured rating to Ca from B3. The downgrade of Grupo Iusacell ("Iusacell" or "the company") and Grupo Iusacell Celular debt ratings mainly reflect: 1) the recent announcement that Iusacell intends to restructure its debt; 2) the rating agency's belief that additional financial support from Verizon or Vodafone is highly unlikely; 3) Moody's concerns about the continuous deterioration in financial flexibility in 3Q02; 4) further weakening of the debt protection measures over the same period; and 5) a continuing inability to reverse the market share loss to Telcel and other competitors. The new rating levels also reflects Moody's view that default risk is high as well as the view that bondholders, particularly at the Grupo Iusacell level, could experience significant loss. We note that financial resources are extremely tight given that i) cash on hand is running out, ii) the company has no alternative liquidity lines - outside of nominal vendor financing, and iii) Iusacell continues to be free cash flow negative. Moody's believes that much of the value in a recovery situation would accrue to the senior secured lenders (roughly US$265 million in bank debt at Grupo Iusacell Celular), though there may be a very limited pool of potential buyers for the company's assets. Additionally, Moody's believes that financial support from the two major shareholders, Verizon Communications and Vodafone, is increasingly unlikely. Grupo Iusacell reported unrestricted cash reserves of just US$8 million, a restricted cash balance of US$25 million, which is held in escrow to pay interest on the 14.25% US$350 million senior notes maturing in 2006, and was free cash flow negative (EBITDA minus working capital, capex, interest and payments, and dividends) in 3Q02. In addition, the company has access to lines of credit amounting to around US$15 million, most of which are in the form of vendor financing. The competitive environment continues to be tough, in particular due to a strong execution of Telcel, Mexico's largest wireless operator. In addition, Telefsnica de Espana will become the second largest wireless company in the country with the merger of its Northern territories and Pegaso. Furthermore, Unefon (the fourth largest operator) recently defaulted on Nortel's debt, which will hinder its capacity to expand coverage in order to meet a growing demand. This represents a clear opportunity for the first two operators to further gain market share, if they take advantage of their national coverage and substantial financial capacity. Grupo Iusacell, with headquarters in Mexico City, is a wireless CDMA operator with a subscriber base of more than 2.1 million and licensed POPs of around 90 million. The company is controlled by Verizon Communications and Vodafone PLC. Copyright 2002, Reuters News Service