Chile Telecom Operator WOM Files for Bankruptcy in the US

Vinícius Andrade, Bloomberg News

Chris Bannister, chief executive officer of Wom Colombia, at the company’s headquarters in Bogota, Colombia, on Tuesday, Feb. 16, 2021. Wom has found success through showy marketing tactics and by offering cut-rate mobile phone prices in markets where service is expensive and competition is limited. , Photographer: Alejandra Quintero/Bloomberg

(Bloomberg) -- WOM, once a rising Chilean startup that vowed to challenge the country’s dominant telecom operators, filed for bankruptcy after falling short on a plan to refinance $348 million in debt due in November.

The company filed for Chapter 11 bankruptcy protection in Delaware, according to documents dated Monday. The filing allows WOM, which had about $1.8 billion in total liabilities at the end of last year, 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.

The mobile network operator had bet on cheap plans and a bold marketing campaign to defy Chile’s incumbents, weathering intense competition across Latin America along the way. But recently it had drained cash as it fought to maintain its market share.

The developments suggest “that WOM is unlikely to pay the forthcoming coupons on the 2024 and 2028 notes” due in May and June, Lucror Analytics credit analyst Sebastian Hofmeister wrote in a note, reaffirming a sell recommendation for bonds.

The bonds due in 2024 fell below 30 cents on the dollar last week as speculation over a default mounted, according to Trace data.

Some holders of dollar bonds issued by WOM had hired Ducera Partners LLC and Dechert LLP as advisers, people familiar told Bloomberg News last month. The Chilean firm hired Rothschild last year to help it refinance its debt.

WOM, which stands for “Word of Mouth,” was created after Novator Partners LLP acquired the assets of Nextel Chile in 2015 and re-branded the unit. Novator was founded by Icelandic businessman Thor Bjorgolfsson.

The company has 21% of the market share for mobile lines in Chile, lagging only Telefonica SA’s Movistar and Entel SA, according to data through September collected by the local regulator. Carlos Slim’s Claro has the fourth biggest share.

Finding the right capital structure through the Chapter 11 process was “the best decision” to protect the firm’s value and long-term potential under a challenging macroeconomic environment, Bjorgolfsson said in a statement.

--With assistance from Maria Elena Vizcaino and Jeremy Hill.

(Updates with context, additional comments starting in second paragraph.)