WOM files for Chapter 11 protection

July 2024 | DEALFRONT | BANKRUPTCY & RESTRUCTURING

Financier Worldwide Magazine

July 2024 Issue

In a move intended to keep the telecommunications service provider operating while it reorganises its capital structure and addresses its short-term liquidity needs, WOM has voluntarily initiated Chapter 11 bankruptcy proceedings in the US.

The filing shows that the Chilean WOM – which stands for ‘Word of Mouth’ – has debts of more than $1bn after delays in it securing the refinancing of a $348m debt that was due in November 2024.

Among a range of factors placing significant pressure on WOM’s short-term liquidity are the company’s approaching bond maturity date, elevated interest rates and a difficult credit market environment.

Moreover, these tight market conditions with limited investor appetite and very high costs of debt have prevented WOM from obtaining favourable refinancing conditions while its liquidity continued to deteriorate.

“After evaluating different scenarios that would allow us to ensure the financing stability of the

company, we concluded that voluntary Chapter 11 is the best option to protect the value of the

company,” said Chris Bannister, chief executive of WOM. “We are focused on maximising our long-term business potential, continuing to provide the best service to our customers, protecting our employees, meeting our government commitments and ensuring we have adequate liquidity to invest in our future growth.”

Mr Bannister is keen to stress that the Chapter 11 process does not involve the liquidation or bankruptcy of the company. Rather, it allows the company to continue its business operations, work with creditors and other stakeholders, access new sources of funding and support the long-term viability of the business.

To help facilitate the restructuring of its business, WOM has secured a $210m debtor-in-possession (DIP) financing agreement with JPMorgan, which will provide key financing to support operations and accelerate growth in Chilean markets. This financing is subject to court approval.

The fourth entrant in Chile’s mobile market in 2015, in eight years WOM has consolidated its position as the second largest operator in mobile connections with a 25.8 percent market share and more than 8 million customers. The company is working to connect millions of people to the largest 5G network to contribute to reducing the digital gap in Chile.

Despite the short-term obstacles stemming from a confluence of certain acute external factors, during the last few quarters the company has achieved sustained growth in earnings before interest, taxes, depreciation and amortisation (EBITDA) and revenues.

“Our commitment to connect millions of Chileans to the largest 5G network in the country and thereby reduce the digital divide in Chile remains intact, as does our spirit as a company,” added Mr Bannister. “We know that our arrival in Chile marked a before and after in the telecommunications market, we dared to offer fair prices for the benefit of millions of people, and we will continue working with the same passion that characterises us.”

During the Chapter 11 process, WOM is being advised by White & Case, LLP, Richards, Layton & Finger, P.A. and Carey as legal advisers, with Riveron Consulting as financial adviser and Rothschild & Co. as investment banking adviser.

Mr Bannister concluded: “Filing for Chapter 11 enables us to continue operating while working toward paying our creditors, meet our network coverage commitments and restructure the business.”

Fraser Tennant