Axtel ponders asset sale to stave off debt default

Mexican fixed-line operator Axtel is considering a sale of its wireless towers or fibre-optic lines to avoid defaulting on its debt, according to a report from Bloomberg.

The sale could reportedly raise as much as $300 million for Axtel, which would then rent the assets to continue operating as normal.

Bloomberg reckons that Axtel has to repay a total of $825 million of debt by 2019. In the meantime, it has been struggling to generate cash after slashing its prices in the face of tough competition from Telmex, owned by Carlos Slim’s America Movil.

Mexican fixed-line operator Axtel is considering a sale of its wireless towers or fibre-optic lines to avoid defaulting on its debt, according to a report from Bloomberg.

The sale could reportedly raise as much as $300 million for Axtel, which would then rent the assets to continue operating as normal.

Bloomberg reckons that Axtel has to repay a total of $825 million of debt by 2019. In the meantime, it has been struggling to generate cash after slashing its prices in the face of tough competition from Telmex, owned by Carlos Slim’s America Movil.

An analyst quoted by Bloomberg said a sale of the towers would be preferable to a sale of fibre-optic lines because the former are not essential to the running of the business.

A buyer of the assets would be able to lease capacity not only to Axtel but to other operators as well. Axtel uses its towers mainly to provide WiMax services to business and residential customers, but they could be used to offer cellular services in the future.

Axtel has apparently ruled out a sale of its licenses to provide WiMax and other telecoms services.

The operator owes about $66 million in interest payments over the next eight months and has cash reserves of only about $64 million.

According to Bloomberg, Axtel has a syndicated loan of $60 million due in 2015, bonds of $275 million due in 2017 and bonds of $490 million due in 2019.

Ratings agency Standard & Poor’s has recently downgraded Axtel’s debt by one level to CCC+ because of earnings weakness as a result of heightened competition.