Price talk on the $500 million term loan "B" and the $100 million revolver for Virgin Mobile USA has increased to LIBOR plus 4 1/2%, the second price flex on the "B" since the deal launched in June. JPMorgan and Merrill Lynch are leading the deal. Pricing on the "B" was initially quoted at 3 1/2% and was then increased to 4%. This is the first price hike on the revolver (LMW, 6/24). A spokeswoman for the company declined to comment.
Moody's Investors Service assigned a B3 rating to both tranches back in May. It was a first-time rating for the company. In its report, Moody's notes the company faces a challenging operating environment as U.S. wireless growth slows and "carriers seek to increase their penetration of Virgin Mobile USA's target markets." The rating agency also remarks on the inherent challenges of profitably providing prepaid wireless service in the U.S., as well as the company's high leverage and current lack of free cash flow.
The rating is also constrained by Moody's opinion of the lack of asset protection available to lenders in a distress scenario, as the company is a virtual network operator, without spectrum or wireless network assets.