Moody's downgrade Axtel

Moody's Investors Service said it downgraded Axtel SAB de CV's corporate family rating to Caa3 from Caa1 and its existing senior unsecured global notes to Ca from Caa2 following news that the company offered to exchange up to $110 million out of $268 million in senior unsecured global notes due in 2017 and 2019 for senior secured notes due 2020.

Moody's said this offer constitutes a distressed exchange and is a default event.

On Nov. 25, Axtel announced an offer to exchange up to $110 million of the company's outstanding $133 million 7 5/8% senior unsecured notes due 2017 and $134.6 million 9% in senior unsecured notes due 2019 for up to $10 million in 7% peso-denominated senior secured convertible dollar-indexed notes due 2020.

In addition to the exchange, the company announced a private placement of additional $36 million to its senior secured notes due 2020 for a maximum combined add-on of $146 million. Moreover, Axtel announced in recent weeks that the company obtained several revolving lines of about $35 million aimed to strength the company's liquidity, which has been diminished by the company's operating losses associated with the undertaking of certain government projects, which has depleted working capital, Moody's said.

Axtel's credit metrics and capital structure will deteriorate due to increased debt that will take the company's adjusted leverage up to 3.5x on a pro forma basis from the current 3.2x as of Sept. 30, the agency said.

The continued presence of liquidity risk and high working capital requirements support the negative outlook on the ratings, Moody's added.

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