S&P rates CyrusOne loan BB-, notes B+

Standard & Poor's said it assigned a B corporate credit rating to CyrusOne Inc.

The outlook is stable.

S&P also said it assigned a BB- rating and 1 recovery rating to operating subsidiary CyrusOne LP's proposed $225 million secured revolving credit facility due 2017.

The 1 recovery rating indicates 90% to 100% expected default recovery.

The agency also assigned a B+ rating and 2 recovery rating to the company's proposed $500 million of senior unsecured notes due 2022. The 2 recovery rating indicates 70% to 90% expected recovery in a default.

The proceeds will be used to repay roughly $475 million of intercompany debt owed to parent company Cincinnati Bell Inc.

Following an initial public offering, S&P said it expects Cincinnati Bell to own 9.8% of common shares in CyrusOne Inc. and a large majority of operating partnership shares in CyrusOne LP. CyrusOne also plans to convert into a REIT in conjunction with the IPO, which could occur in the fourth quarter of 2012 or early 2013, the agency said.

The ratings reflect the company's highly leveraged financial profile, including an expectation for substantial cash outflows to fund what is considered an ambitious growth strategy, S&P said.

The company's business risk is considered weak and takes into account the relatively favorable growth expectations for data-center outsourcing by large business customers, the agency said.

The ratings also recognize the longer-term risks of aggressive expansion leading to pricing declines or higher customer churn, S&P added.

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