Terex Could Fall, Sprint Affiliates Face Liquidity Problems

  • 03 Nov 2002
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Weaker-than-expected third quarter operating results have prompted Moody's Investors Service to review Terex for possible downgrade. The review of the company's $985 million Ba3-rated bank facility reflects the continuing weak demand for construction and mining equipment in the struggling market. "The market demand [for construction, infrastructure and mining equipment] is deteriorating," explained Charles Tan, senior analyst at Moody's. The agency has further uncertainties about the equipment manufacturer's performance outlook for the intermediate term. "There's not much visibility out there," Tan noted.

Also, Terex faces integration challenges, with difficulties in its Atlas acquisition incorporation-- one of several acquisitions made by Terex over the past two years. Tan stated that the integration efforts are not going well. Moody's will further focus on the Westport, Conn.-based company's more recent purchase of Demag Mobile Cranes and Genie Holdings. Terex's facility includes a $300 million revolver, a $375 million "B" term loan, and a $210 million "C" term loan that was an add-on piece to back the Genie acquisition. Terex's $750 million in B2 notes were also placed on review. Tan cited the company's total debt at $1.6 billion. A Terex official did not return calls.

* Moody's downgraded the credit ratings of seven Sprint PCS affiliates, reflecting slower subscriber growth and liquidity pressures. Sprint and its affiliates' business model of targeting customers with poor credit quality was not as successful as anticipated, with Sprint removing subscribers unable to pay their bills. "Churned," or disconnected, subscribers are difficult to replace because of saturation in the wireless marketplace, worsening the business model's effects, explained Marcus Jones, senior analyst at Moody's.

The affiliates are also subject to Sprint's weak franchise agreement, which lacks individual control over marketing and customer service. Sprint's reputation of poor customer service and its affiliates' limited liquidity to improve network quality further lessens the prospect for new customers, preventing the affiliates from growing into their capital structures. Jones added that the affiliates do not get any of their own spectrum, or airwaves, exacerbating the flawed credit position. Moody's retained a negative ratings outlook. Affiliates include Airgate PCS, Alamosa, Horizon PCS, iPCS, IWO Holdings, UbiquiTel Operating Company and US Unwired, with over $1 billion in credit facilities affected. The credit rating downgrades range from between Ba3 and B2 to between B2 and Caa1.


Other Ratings Actions
Charter CommunicationsB2Downgraded to B3Moody's
Isplat InlandCaa2Upgraded to Caa1Moody's
MilacronBa3Downgraded to B1Moody's
  • 03 Nov 2002

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Rank Lead Manager/Arranger Total Volume $m No. of Deals Share % by Volume
1 Citi 7,029 20 10.95
2 Bank of America Merrill Lynch (BAML) 6,703 19 10.45
3 JP Morgan 4,776 10 7.44
4 Credit Suisse 4,718 9 7.35
5 Deutsche Bank 4,262 13 6.64

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2 Bank of America Merrill Lynch 57,568.62 162 9.83%
3 JPMorgan 55,390.36 159 9.46%
4 Citi 55,051.46 160 9.40%
5 Credit Suisse 43,756.73 120 7.47%