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Investing.com -- Moody’s Ratings has downgraded Xplore Inc.’s corporate family rating to Caa1 from B3, while maintaining a stable outlook, citing slower-than-expected subscriber growth that will limit EBITDA expansion and increase debt ratios.
The rating agency also downgraded Xplore’s probability of default rating to Caa1-PD from B3-PD, backed first-out super senior secured first lien term loan and backed first-out super senior secured first lien delayed draw term loan ratings to B1 from Ba3, and backed second-out senior secured first lien term loan rating to Caa1 from B3.
"The ratings downgrade reflects slower-than-expected subscriber growth, which will constrain EBITDA expansion and significantly increase debt/EBITDA through 2027," said Peter Adu, Moody’s Ratings Vice President and Senior Credit Officer.
Moody’s identified several constraints on Xplore’s Caa1 rating, including a challenging business environment with increasing competition and declining subscribers in rural/remote markets, ongoing negative free cash flow due to network capital expenditures, and rising debt levels to fund capital investments and PIK interest expenses.
The company’s rating benefits from its position in rural/remote Canadian markets with long-term growth potential, adequate liquidity including government subsidies supporting fiber and fixed wireless investments, and favorable regulatory conditions for wireless spectrum auctions.
Xplore’s debt structure includes $72.45 million (C$100 million equivalent) in super senior first-out secured term loans due 2029, $65.2 million (C$90 million equivalent) in first-out secured delayed draw term loans due 2029, and $239.1 million (C$325 million equivalent) in first lien take-back term loans due 2031.
Moody’s revised Xplore’s ESG credit impact score to CIS-5 from CIS-4, citing increased governance risks despite the company’s exit from bankruptcy in October 2024. The agency noted Xplore continues to face challenges monetizing investments to boost EBITDA, keeping financial leverage high for an extended period.
The company maintains adequate liquidity through August 31, 2026, with sources exceeding C$1.2 billion versus approximately C$700 million of negative free cash flow due to network capital expenditures. Liquidity sources include C$87.4 million in cash as of June 30, 2025, about C$170 million available from shareholder equity funding, over C$500 million in provincial government subsidies, approximately C$314 million available under a Canada Infrastructure Bank loan, about C$74 million available under a delayed draw term loan, and potential proceeds from spectrum monetization.
The stable outlook reflects Moody’s expectation that Xplore will maintain sufficient liquidity with committed financing to fund its fiber and fixed wireless investments, while showing gradual improvement in operating performance.
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