S&P affirms Integra

Standard & Poor's said it affirmed its B- corporate credit rating on Integra Telecom Inc. following the company's announcement that it would convert all of its $365 million of mandatory redeemable preferred stock to common stock and modify its proposed debt financing.

The agency also affirmed the CCC+ bank loan and 5 recovery ratings on subsidiary Integra Telecom Holdings Inc.'s proposed $50 million senior secured first-lien revolver and $595 million term loan, which is being reduced from $715 million, and the CCC bank loan and 6 recovery ratings on the $325 million senior secured second-lien term loan, which is upsized from $270 million.

Integra Telecom Inc.'s proposed $280 million senior unsecured floating-rate payment-in-kind loan, which is also being upsized from $215 million, is rated CCC.

The outlook is positive.

Proceeds of $1.2 billion will be used to fund the $559 purchase of Eschelon Telecom Inc. (B-/stable) and to redeem $462 million of debt.

While these changes are viewed as incrementally favorable for credit quality, the impact is not sufficiently material to change the rating or outlook, according to the agency.

The ratings reflect a high degree of business risk, a highly leveraged financial risk profile and some regulatory risk, S&P said.

Tempering factors include reasonable prospects for healthy discretionary cash flow generation, the potential for meaningful operating synergies, long average customer contract durations and regional density, the agency said.

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