S&P lowers Equinix to BBB-, rates loan BBB-

S&P said it reviewed its recovery and issue-level ratings for Equinix Inc. that were labeled as "under criteria observation" (UCO) after publishing its revised recovery ratings criteria on Dec. 7, 2016. With its criteria review complete, the agency removed the UCO designation from these ratings and lowered all of Equinix's secured debt ratings to BBB- from BBB because it now caps issue ratings for most speculative-grade issuers at BBB-, regardless of the recovery rating.

This change deemphasizes the weight recovery plays in the up-notching issue ratings for issuers near the investment-grade threshold, because recovery is a smaller component of credit risk when default risk is more remote, particularly considering recovery prospects may be less predictable and more variable for these issuers, the agency explained.

This revision does not reflect a change in S&P’s assessment of the company's default risk, which is indicated by the corporate credit rating, or the agency’s opinion of recovery given default, which is indicated by the recovery ratings.

In addition, S&P said it assigned its BBB- issue-level rating to Equinix 's proposed €500 million seven-year term loan B. The recovery rating is 1, indicating an expectation for very high (90%-100%) recovery for secured creditors in the event of a payment default.

The BB+ corporate credit rating and stable outlook remain unchanged.

The agency expects the company to use proceeds along with a mix of senior notes and equity to fund the $3.6 billion purchase of 29 data centers from Verizon.

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