Iusacell seeks new extension to US$266mn debt

Mexican mobile operator Iusacell (NYSE: CEL) is once again in default on a US$266mn syndicated loan after breaching certain conditions set out by creditors, the company said in a statement Friday. The loan was originally due in March 2001, but cash-strapped Iusacell has negotiated a series of extensions. The last extension expired on June 26, and the company has asked creditors for what could be its fourth extension. "The lenders under the credit agreement have the right to declare the indebtedness under their loan immediately due and payable," according to the statement. Iusacell fell into default because during the first half of 2003 it exceeded the permitted leverage ratio of 2.5 under the loan agreement. "I think it is a move that the market expected," Monex brokerage equity analyst Gerardo Copka told BNamericas, adding a final solution to Iusacell's debt problems would probably happen after it becomes clear who ends up owning the company. Local businessman Ricardo Salinas made an offer on June 13 to buy Iusacell for US$10mn and assume its roughly US$820mn debt. Iusacell's shareholders Verizon (NYSE: VZ) and Vodafone (NYSE: VOD) have agreed to sell their 73.9% combined stake in Iusacell to Movil Access, a company in the Salinas business empire. Salinas controls rival mobile operator Unefon through TV Azteca Holdings. Market observers believe that in the event of a successful takeover, Salinas plans to keep Iusacell and Unefon operating as separate companies, rather than create a unified operator. A hypothetical merger of the two operators would let Unefon and Iusacell jump ahead of Telefonica Moviles Mexico to become the country's second largest operator. The two companies have between them 3.5 million subscribers, compared to 2.5 million subscribers at Telefonica Moviles Mexico. However, as the tallest dwarf on the block the new company would still be overshadowed by market leader Telcel's 20 million plus client base.