MUMBAI (Thomson Financial) - Standard & Poor's Ratings Services said it
affirmed the 'B' corporate credit rating and 'B-' bank loan rating on New
York-based competitive local exchange carrier PAETEC Holding Corp's proposed
incremental 100 mln usd first lien term loan B due 2013, which raises the loan
to 600 mln.
The outlook remains positive, it added.
Proceeds from the term loan along with existing cash on hand will be used to
repay 104 mln usd of outstanding McLeodUSA debt and a 15 mln usd tender premium
for that debt as well as related fees and expenses, S&P said.
The ratings agency also said it expects to withdraw the ratings on McLeodUSA
(rated 'B-' with negative outlook) when the transaction closes. The rating
affirmation reflects the fact that the transaction is leverage neutral, S&P
said.
The ratings on PAETEC continue to reflect a vulnerable business risk
profile, the lack of any sustainable competitive advantages, integration risks
from recent acquisitions, and low barriers to entry, it added.
Tempering factors include healthy discretionary cash flow, long average
contract durations and low churn, and market diversity. PAETEC is not well
positioned to combat competitive pressures from better-capitalised
telecommunication providers on a prolonged basis, S&P said.
Nevertheless, PAETEC benefits from a few positive business trends that
should contribute to moderate growth over the longer term, including its low
market penetration of addressable lines, it said.
TFN.newsdesk@thomson.com
npr/ran
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