S&P puts Virgin Mobile USA on negative watch

Standard & Poor's said it placed Virgin Mobile USA LLC's B- corporate credit and bank loan ratings on CreditWatch with negative implications. The 5 recovery ratings on the company's $500 million senior secured term B bank loan and $100 million senior secured revolving credit facility are unaffected.

The action follows the company's disclosure that it was not in compliance with the minimum service revenue covenant under its bank credit agreement at Dec. 31. The company also anticipates that it will not be in compliance with the net service revenue, quarterly minimum leverage and fixed-charge ratio covenant tests as of June 30. Accordingly, it classified the $497.5 million outstanding on the $500 million term loan maturing in 2011 as a current liability.

There was no outstanding amount on the $100 million revolving credit as of Dec. 31. Virgin Mobile USA's auditors indicate that the failure to comply with the bank covenants raises substantial doubt about the company's ability to continue as a going concern, the agency said. The company is in discussions with its lenders to amend its bank agreement.

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