WOM S.A., the privately held telecommunications service provider based in Santiago, Chile, has filed for Chapter 11 bankruptcy protection in Delaware, according to documents dated Monday, Bloomberg reported. The filing comes after the company fell short on a plan to refinance $348 million in debt due in November. The filing allows WOM, which reported almost $1.8 billion in total liabilities at the end of 2023, to keep operating while it works on a plan to repay creditors. The company said in a separate statement that JPMorgan Chase & Co. had agreed to provide $200 million in debtor-in-possession financing, subject to court approval.
WOM is the third ranked mobile network operator in Chile, behind Entel PCS and Telefónica’s Movistar but ahead of América Móvil’s Claro, according to reports from Chilean telecom regulator, SUBTEL. WOM served nearly six million wireless subscribers at the end of 2023.
WOM had bet on cheap calling plans and a bold marketing campaign to challenge Chile’s incumbent MNOs. However, intense competition in the region had drained cash as the company struggled to maintain its market share, according to Bloomberg.
WOM has blamed its financial problems on its delayed 5G rollout, while credit rating companies downgraded the company’s debt early last year, including 2024 and 2028 bonds totaling $649 million, according to Robert Wagstaff, WOM Chief Restructuring Officer. This downgrade led to the Inter-American Investment Corp., an affiliate of Inter-American Development Bank, to reduce its credit facility to the company, Wagstaff added.
“The number of such actions against the company may grow in the near term if the company’s liquidity position is not immediately stabilized,” he stated.
Wagstaff added that WOM has also had issues constructing telecom towers on time. “The company has been in an international arbitration proceeding with the government of Chile over restrictions in the construction of cellular towers in certain areas of the country,” Wagstaff said. “The company’s inability to build towers at the expected pace prevented the company from selling the constructed towers under the sale-leaseback agreement with Phoenix Tower International and deprived the company of an estimated $25 million in liquidity in 2023.”
WOM, which stands for “Word of Mouth,” was created after British private equity firm Novator Partners LLP, founded by Icelandic businessman Thor Bjorgolfsson, acquired the assets of Nextel Chile in 2015 and re-branded the unit.
Finding the right capital structure through the Chapter 11 process [in a U.S. bankruptcy court] was “the best decision” to protect the firm’s value and long-term potential under a challenging macroeconomic environment, Bjorgolfsson said in a statement.
By John Celentano, Inside Towers Business Editor
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