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Integra refinances $825 million of debt, raises S&P, Moody's credit ratings

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Integra Telecom, a growing CLEC serving SMBs and enterprises in the Western United States, on Monday refinanced $825 million of its debt.

Out of this process, the CLEC gained a $60 million revolving credit facility (which was undrawn at closing), a $585 million first lien term loan due 2019 and a $200 million second lien term loan due 2020.

Net proceeds from the new credit facilities were used to refinance its outstanding term loan and bonds.

With the new financing in hand, the CLEC reported that it raised its credit ratings with both Standard & Poors and Moody's Investors Service.

Standard & Poor's Rating Service affirmed Integra's corporate family rating of B and revised its outlook to stable from negative, while Moody's Investors Service affirmed its B3 rating and revised its outlook to positive from stable.

A key benefit of the refinancing is that it will be able to lower its annual cash interest expense by approximately $19 million, giving it financial flexibility to execute on its plan to grow its presence in the medium and large business market segments.

"On the back of both of what's not only an attractive market, but also our improving business results we're going to reduce our interest expense by 25 percent, which is $15-20 million a year in cash interest expense which we can reinvest in the business and driving our strategy and growth," said Joe Harding, VP of marketing for Integra Telecom, in an interview with FierceTelecom.

Evidence of its emphasis on larger business customers was illustrated well in Integra's Q4 2012 results. In Q4 2012, the service provider reported $149 million in total revenue.

Using its growing copper and fiber-based networks as the core foundation, the service provider introduced a number of new products throughout 2012 to appeal to larger business customers, including E-LAN, wavelength services, wholesale dark fiber, and 60 Mbps Ethernet over Copper (EoC).

"With a rich underlying fiber network that's an asset, but if you don't have the products enabled to leverage that fiber asset base it's only going to get you so far," said Harding. "As we looked to expand up market, we wanted to make sure that we had the right set of products and services to support the requirements of those larger customers."  

Since the end of 2011, Integra increased strategic sales to 80 percent. Likewise, it grew strategic revenues from 24 percent at the end of 2011 to 34 percent.

While it continues to see ongoing churn with its smallest business customers of 2.5 percent, customers that spend over $1,000 a month, which are now 61 percent of its revenue, churn at less than 1 percent.

"As we look continue to drive that progress on serving larger customers, we think that helps us on churn as well," Harding said.

For more:
- see the release

On the Hot Seat: Integra's Kevin O'Hara on transitioning to larger-scale wholesale, retail business services

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