Moody's rates Internap loans B3

Moody's Investors Service said it assigned a B3 corporate family rating, a B3-PD probability of default rating and an SGL-2 speculative grade liquidity rating to Internap Network Services Corp. and B3 (LGD3, 46%) ratings to its $300 million senior secured term loan due 2019 and $50 million senior secured revolving credit facility due 2018. The outlook is stable.

The company plans to use the proceeds to refinance existing debt and to fund the $145 million acquisition of hosting provider iWeb.

The agency said Internap's B3 corporate family rating reflects its small scale, high leverage and consistent negative free cash flow as a result of its high capital intensity. The rating also incorporates Moody's concerns that the company derives about half of its revenue from its lower-margin partner data center business and its IP services business, which faces continual price pressure and represents somewhat of a commodity-like service.

In Moody's view, these limiting factors are offset by Internap's stable base of contracted recurring revenues within its company-controlled datacenter business and its established reputation as a high-quality provider in the fast-growing collocation, managed services and cloud segments.

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