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24 Jan 2001
MOODY'S ASSIGNS B2 RATING TO TIME WARNER TELECOM INC.'S PROPOSED $400 MILLION SENIOR NOTES. OUTLOOK CHANGED TO POSITIVE
Approximately $1.8 Billion of Debt Securities Affected
New York, January 24, 2001 -- Moody's Investors Service has assigned a B2 rating to Time Warner Telecom
Inc.'s ("TWTC") proposed $400 million senior notes due 2011.
Moody's has also confirmed Time Warner Telecom Inc.'s B1 senior
implied rating, its B2 issuer rating, its B2 rated 9.75%
$400 million notes due 2008, and Time Warner Telecom Holdings
Inc.'s $1 billion senior secured bank credit facility,
rated Ba3. The outlook has been changed to positive from negative.
On January 10, 2001, TWTC completed the acquisition of substantially
all of the assets of GST Telecommunications, Inc. for a total
purchase price of $690 million, of which $627 million
was paid in cash. In connection with this acquisition, TWTC
increased the size of its senior secured credit facility by $525
million and obtained a $700 million senior unsecured bridge financing
facility. The company intends to retire the bridge facility with
the proceeds of the proposed $400 million senior notes, and
a proposed $300 million issuance of common stock.
In October, 2000, Moody's issued a negative outlook on TWTC
based, in part, on our perception that capital market conditions
may present risks to the company's ability to successfully refinance the
bridge facility, and our view that without additional equity,
the capital structure of TWTC would be fully leveraged.The change
to a positive outlook reflects the relative improvement in pro-forma
leverage that will result, following the successful placement of
the proposed $300 million equity issue, as well as our expectation
of continued operational and financial improvement.
TWTC management has demonstrated good execution of its business plan since
our initial rating was assigned in June 1998, and the company is
presently one of only a few CLEC's to enjoy positive EBITDA. Moody's
believes that the absorption of GST's negative results will be more than
offset by TWTC's organic EBITDA growth.
The ratings reflect the risks associated with the company's relatively
early stage of operations and the challenges associated with building
a sizable, stable customer base and developing the necessary support
systems in order for the company to develop into a profitable facilities-based
service provider. The ratings also recognize the company's strengths,
which include a well-regarded management team, strategic
owners who provide significant value and a track record of good execution
TWTC has benefited from and continues to leverage its relationship with
Time Warner Inc. TWTC not only benefits from the use of the Time
Warner brand name, but TWTC has also acquired the right to use certain
fiber, rights-of-way and office space from Time Warner
in markets in which it operates. This arrangement has allowed TWTC
to quickly enter markets at a lower cost. Presently, Time
Warner maintains a 48% ownership interest (66% voting control)
The senior notes are being sold in a privately negotiated transaction
without registration under the Securities Act of 1933 (the "Act") under
circumstances reasonably designed to preclude a distribution thereof in
violation of the Act. The issuance has been designed to permit
resale under Rule 144A.
Time Warner Telecom Inc. is headquartered in Littleton, Colorado.
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: (212) 553-0376
SUBSCRIBERS: (212) 553-1653
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: (212) 553-0376
SUBSCRIBERS: (212) 553-1653
No Related Data.
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