NEW YORK-Moody’s Investors Service Ltd., London, has downgraded the speculative grade ratings of $775 million in debt owed by Dolphin Telecom plc, the largest European provider of specialized mobile radio services.
The rating agency said it began its review in March and that further downgrades are possible to the outstanding debt, now rated Caa2, down from Caa1. In its June 6 announcement, Moody’s also downgraded Dolphin’s speculative grade corporate rating to Caa1 from B3.
The C ranking represents the lowest echelon in Moody’s criteria for evaluating speculative grade debt, also known as high yield or junk bonds. Caa comprises the top cluster of this bottom ranking. It goes down in increments of one, two or three, which are appended to rating, as is also the case for the next-worst category of Ca and the bottom ranking of C. Below a C3, therefore, the credit is too risky to receive a rating.
“The rating downgrade represents Dolphin’s current inability to demonstrate a fully funded business plan beyond 2000,” said Carlos Winzer, senior vice president, and Michael West, senior analyst for Moody’s European corporate ratings.
“[The downgrades] also reflect uncertainty [about] the company’s ability to successfully meet operational targets allowing it to gain access to additional financing [and] uncertainty [about] whether Dolphin’s parent, [Telesystem International Inc., Montreal], will be able to provide additional equity financing … in a timely manner beyond its existing commitments in the current year.”
Dolphin, headquartered in Basingstoke, England, is the largest SMR provider in Europe and is engaged in a phased rollout of a trans-Europe digital enhanced SMR network. The company closed the first quarter with cash flow losses of $38.1 million on revenues of $21.6 million.
“On the positive side, the ratings recognize the support of Dolphin’s major vendors [and] the company’s current leading position as a provider of ESMR, a product Moody’s believes has a niche potential to drive and sustain future cash flows as an alternative to [Global System for Mobile communications],” Winzer and West said.
