Bangkok--21 Dec--S&P Global Ratings
- Verizon authorized retailer Go Wireless Holdings Inc.'s proposed first-lien term loan has been downsized to $300 million from $400 million. The company will use proceeds from the term loan to refinance existing debt and to pay a special dividend to shareholders.
- We are affirming our 'B' corporate credit rating on Go Wireless.
- At the same time, we are raising our issue-level rating to 'B+' from 'B' based on the downsize. We also revised the recovery rating to '2' from '3'.
- The stable outlook reflects our expectation for adjusted debt to EBITDA to approach the mid- to high-4.0x area over the next 12 months upon EBITDA base expansion through acquisitions.
NEW YORK (S&P Global Ratings) Dec. 20, 2017--S&P Global Ratings today affirmed its 'B' corporate credit rating on Las Vegas-based Verizon authorized retailer Go Wireless Holdings Inc. The outlook is stable.
At the same time, we raised our issue-level rating on Go Wireless' proposed $300 million (downsized from $400 million) first-lien term loan due 2024. We also revised the recovery rating to '2' from '3'. The '2' recovery rating indicates our expectation for substantial (70%-90%; rounded estimate: 70%) recovery in the event of a payment default. The company's capital structure will also include a $50 million asset-based lending (ABL) revolver facility due 2022, which we do not rate.
The ratings on Go Wireless reflect its decent market position as Verizon's third-largest independent retailer based on store count and somewhat non-discretionary nature of demand for mobile phones. These factors are offset by the company's complete dependence on Verizon as the sole broadband provider that narrows its service offerings, susceptibility of revenues and cash flows to product cycles, potential changes to commissions received from Verizon, and execution risks associated with the company's aggressive growth strategy. Over the next 12 months, we expect adjusted debt to EBITDA to approach mid- to high-4.0x, mainly on EBITDA contributions from acquisitions.
The stable outlook reflects our expectation that adjusted debt to EBITDA will approach the mid- to high-4.0x area and fixed-charge coverage of just below 2.0x over the next year given our expectation for EBITDA base expansion upon store acquisitions and modest improvement in margins.
We could lower the rating if we expect adjusted debt to EBITDA to be sustained above 6.0x and fixed-charge coverage ratio of 1.5x or less. Potential scenarios include the company's inability to effectively execute on its growth strategy and expand its EBITDA base or deterioration of operating performance, possibly because of unfavorable commission arrangements or heightened competition.
We could raise the rating if we expect the company to sustain adjusted debt to EBITDA of less than 4.5x and fixed-charge coverage ratio of 2.2x or better. This could be the case if the company is able to materially grow its EBITDA base while modestly improving its margins on meaningful traction in its operating initiatives.