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Fitch Places Cincinnati Bell's 'B' IDR on Rating Watch Evolving Following Data Center Announcement
Feb 15, 2012 (Close-Up Media via COMTEX) --
Fitch Ratings has placed Cincinnati Bell Inc.'s (CBB) 'B' Issuer Default Rating (IDR) on Rating Watch Evolving following the announcement that the company will explore options for its data center business. A full list of ratings affected follows at the end of this release.
Following the close of the market on Feb. 9, CBB announced that the board of directors has authorized management to evaluate alternatives for its data center business. As stated in its release, the company will consider options including doing nothing and maintain the present structure; a partial separation through a sale, IPO, or other transaction; or depending on the value to the shareholders, a full separation.
The company stated that in its evaluation, it would assess a structure to optimize value for its shareholders while ultimately leaving Cincinnati Bell with an appropriate level of debt for its communications business. The evaluation is expected to take place over six to 12 months.
The Rating Watch Evolving reflects the uncertainty at the present time regarding CBB's credit profile following the conclusion of its strategic evaluation. The company's options imply a wide range of potential capital structure outcomes, including the potential delevering of the communications business. Fitch will maintain the Rating Watch Evolving until CBB's capital structure plans become finalized and evaluated. Thus, Fitch's review is not expected to be concluded prior to the six to 12 month review period disclosed by the company.
Fitch's 'B' IDR for CBB reflects expectations for relatively high, albeit stable leverage and its diversified revenue profile. In addition, its wireline and wireless businesses generate strong free cash flows. Risk factors incorporated into the rating include the competitive pressure on CBB's wireline and wireless segments, as well as the expansion of its data center business.
Due to growth in the data center business and relatively stable wireline performance, CBB's year-end 2011 leverage declined to approximately 4.8 times (x) from 5.0x in 2010. Fitch expects leverage to approximate 4.7x to 4.8x in 2012, within Fitch's range of 4.5x to 5.5x for the current category.
Fitch has placed the following ratings on Rating Watch Evolving:
Cincinnati Bell, Inc.
--IDR at 'B';
--$210 million senior secured revolving credit facility due 2014 rated 'BB/RR1';
--$40 million senior secured notes rated 'BB/RR1';
--$500 million senior unsecured notes due 2017 rated 'B+/RR3';
--$250 million senior unsecured notes due 2015 rated 'B+/RR3';
--$775 million senior unsecured notes due 2020 rated 'B+/RR3';
--$625 million senior subordinated notes rated 'CCC/RR6';
--$129 million convertible preferred stock rated 'CCC/RR6'.
Cincinnati Bell Telephone (CBT)
--IDR at 'B';
--$208 million senior unsecured notes rated 'BB/RR1'.
Additional information is available at 'fitchratings.com'.
((Comments on this story may be sent to newsdesk@closeupmedia.com))
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