MUMBAI (Thomson Financial) - Standard & Poor's Ratings Services said it
affirmed the 'B' corporate credit ratings on New York-based competitive local
exchange carrier Paetec Holdings Corp with a positive outlook after the company
said it will buy McLeodUSA Inc for 557 mln usd in stock and assumption of debt
"Despite the modest improvement in leverage and the expansion of Paetec's
footprint, estimated operating synergies from the merger with McLeodUSA will be
minimal at 30 mln usd, or 2 pct of total revenue, and pro forma margins will be
weaker than that of Paetec on a stand-alone basis," S&P's credit analyst Allyn
Arden said.
S&P said the positive outlook was predicated on the belief that integration
risks from the merger were largely alleviated, which could have resulted in an
upgrade in the near term.
The acquisition of McLeodUSA may inhibit profitability and discretionary
cash flow improvement, thus delaying prospects for an upgrade, the ratings
agency said in a statement.
TFN.newsdesk@thomson.com
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