Fitch lowers Axtel on exchange, rates new notes B+

Fitch Ratings said it downgraded Axtel, SAB de CV's local-currency issuer default rating to Restricted Default (RD) from C, foreign-currency issuer default rating to RD from C and long-term national scale rating to RD(mex) from C(mex).

The downgrades reflect news of the company's successful completion of the exchange offer, which is considered a distressed-debt exchange, Fitch said.

About 51.6% of holders of the $275 million senior notes due 2017 and 72.5% of holders of the $490 million senior notes due 2019 elected to participate in the exchange, the agency said.

These holders will receive $249 million of new 7% step-up senior secured notes due 2020, $22 million of 7% step-up senior secured convertible dollar-indexed notes due 2020 and $82.6 million of cash for an early tender and cash payment. The exchange results in a recovery of about 71% of principal for holders who elected to tender old bonds, Fitch said.

After the exchange, the agency said it upgraded the company's senior unsecured old notes due 2019 to B- with a recovery rating of RR5 from C with a recovery rating of RR4

Fitch also assigned a B- rating with a recovery rating of RR5 to the company's old senior unsecured notes due 2017, along with a B+ rating with recovery rating of RR3 to its new senior secured notes due 2020 and a B+ rating with recovery rating of RR3 to its new senior secured convertible notes due 2020.

The ratings reflect the successful debt exchange, which resulted in a less levered capital structure, the agency said.

Nevertheless, the company still continues to face a strong competitive environment, Fitch added.

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