Teletrac Inc. Placed on S&PWatch, Neg;Rtgs Lwrd
10 August 1998
Teletrac Inc. Placed on S&PWatch, Neg;Rtgs Lwrd
NEW YORK--Standard & Poor's CreditWire 8/7/98--Standard & Poor's today lowered its rating on Teletrac Inc.'s $105 million senior subordinated notes due 2007 and $30 million reduced revolving credit facility to triple-'C'-plus from single-'B'-minus.
Additionally, Standard & Poor's lowered its corporate credit rating on the company to triple-'C'-plus from single-'B'-minus. The ratings were also placed on CreditWatch, with negative implications.
The CreditWatch placement reflects concerns about Teletrac's near-term liquidity, in light of its relatively limited customer growth and associated service revenue expansion over the last 18 months, despite market expansion into a total of 11 markets. Cash balances, which totaled only $15 million at June 30, 1998, are not expected to provide adequate funding of capital and operating requirements beyond the next few months. While Teletrac is currently negotiating for a financing package to cover such needs, it is not clear that the company's core commercial vehicle location and messaging business will penetrate markets sufficiently over the next year to support on-going operations. Moreover, the company's consumer vehicle location service has extremely limited prospects, given its limited penetration, to date.
Teletrac continues to face the challenge of growing its commercial vehicle location business in the face of numerous competitive alternatives, including paging, cellular, and enhanced specialized mobile radio offerings. While expansion into the New York market later this year will increase Teletrac's overall potential customer base, entry start-up costs exacerbate near term liquidity concerns. Moreover, continued growth of the rental base could add to financing requirements. -- CreditWire