There's been a major boost for troubled Chilean operator WOM after it won court approval to exit bankruptcy proceedings, having agreed to a takeover and restructuring bid from a group of creditors. This news comes eight months after WOM filed for Chapter 11, a US bankruptcy process that allows a debtor to reorganise its business or personal assets and debts.
A US bankruptcy judge reportedly rejected an objection to the takeover bid by a rival group of creditors. The offer was described as the only viable option for WOM to exit Chapter 11 proceedings.
The company received the takeover bid from a group of bondholders this month. The offer included US$500 million in new investment, valuing WOM at US$1.6 billion.
Blomberg explains that the investment will be implemented through a securities offering, which includes US$95 million in new bonds due in 2030 and up to US$405 million intended for the acquisition of up to 92% of the shares of the reorganised company.
It adds that about US$200 million of debtor-in possession financing will be paid in cash and the plan will result in a net reduction of debt of approximately US$650 million.
As we reported earlier this year, WOM filed for bankruptcy after it failed to refinance its US$348 million debt pile in November 2023, due to challenging macroeconomic conditions. It reported that it had US$1.8 billion in total liabilities at the end of 2023.
WOM is often described as a challenger operator – setting up shop to disrupt incumbents with bold marketing campaigns and cheaper mobile plans. It competes with Movistar and Entel, taking around a fifth of the Chilean market.
WOM was created by Novator Partners an international private equity, growth equity and special situations investor, founded by Icelandic businessman Thor Björgólfsson in 2004 after it acquired the assets of Nextel Chile in 2015.
In April we reported that WOM Chile CEO Chris Bannister had departed from his role after only six months into the job as the board decided against extending his contract. He apparently blasted shareholders for failing to inject cash into WOM.
His successor, Martin Vaca Narvaja, called the court approval a “landmark in the Chapter 11 process and the efforts we have made as a team to financially restructure the company”. He claimed it “assures the operational continuity of WOM Chile.”
