Moody's upgrades Axtel

Moody's Investors Service said it upgraded Axtel SAB de CV's corporate family rating to Caa1 from Caa2, along with the rating on its $132 million 7.627% senior unsecured notes due 2017 to Caa2 from Ca and its $13 million 9% senior unsecured notes due 2019 to Caa2 from Ca.

The upgrades complete a review that began in December 2012, Moody's said.

The outlook is stable.

Moody's said it does not rate Axtel's new notes issued in January.

The upgrade was based on meaningful debt reduction of about $226 million associated with the exchange of $497 million in old notes for $271 million in new notes plus $83 million in cash.

The upgrade further considers $88 million in additional net debt reduction with proceeds from the sale and leaseback of 883 towers to American Tower, Moody's said.

The 2017 and 2019 notes are rated one notch below Axtel's Caa1 corporate family rating because they are effectively subordinated to the secured exchanged notes, which comprise 50% of the company's total debt outstanding, the agency said.

The ratings reflect uncertainties surrounding litigations on interconnection and termination rates, both with Mexican mobile and wireline telecommunication companies, Moody's said.

If final decisions are adverse to Axtel, these could have a significant impact on its liquidity position, the agency said.

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