Moody's gives Windstream negative rating
Windstream's (Nasdaq: WIN) rating from Moody Investors Service was downgraded from "stable" to "negative" following the telco's decision on Monday to refinance $1.1 billion of its debt due this year.
Windstream said it was trying to get $300 million in term loans to refinance existing term loans that will mature this July. It expects to acquire those loans by the end of this month, subject to market and other conditions.
In addition, Windstream has $1.25 billion in undrawn revolving credit facility, which it can tap into to repay the $800 million in senior notes that will reach maturity later this year.
Moody's assigned a Baa3 rating to Windstream's proposed $300 million Term Loan B-4 due in 2020 and a Ba3 rating to its proposed $700 million senior unsecured notes due in 2023.
"As part of the rating action, Moody's has also changed the company's outlook to negative from stable due to the lack of progress in reducing leverage and Moody's view that the company's competitive position may be undermined by its shareholder friendly capital allocation stance," Moody's said in a statement.
Through its acquisition of Paetec, Windstream has built itself up into a hybrid CLEC/ILEC and the fourth largest business services provider.
While Windstream has continued to grow its business services revenues, Moody's said the company's underinvestment could hurt its long-term competitive position.
"Windstream's high dividend consumes the majority of its discretionary free cash flow and pressures the company's ability to reinvest in capex or repay debt to materially reduce leverage," said Mark Stodden, Moody's analyst.
Stodden added, "low capital spending could negatively impact margins and lead to weaker EBITDA, as the company may rely more heavily upon leased facilities outside its ILEC footprint."
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