Moody's downgrades DTN loans

Moody's Investors Service said it affirmed DTN, Inc.'s (formerly known as Data Transmission Network Corp.) B2 corporate family rating in connection with its plans to retire an existing $60 million second-lien term loan with the proceeds of an increased first-lien term loan.

The agency also downgraded DTN's probability-of-default rating to B3 from B2 and its $25 million senior secured first-lien revolving credit facility due 2011 and $242 million senior secured first-lien term loan due 2013 to B2 (LGD3, 33%) from B1 (LGD3, 36%).

The outlook was changed to positive from stable to reflect the stabilization of DTN's top line and continuing cash flow generation, which Moody's expects will permit the company to reduce its debt-to-EBITDA ratio to around 4x times by the end of 2008.

The agency said the first-lien facilities were downgraded because following the proposed refinancing, first-lien debt will represent the preponderance of the capital structure and will no longer benefit from the loss absorption currently provided by the second-lien debt.

The B2 corporate family rating reflects DTN's high leverage, continuing subscriber churn, the competitive pressure faced by each of its information services product offerings and the limited growth potential of its business model, Moody's said.

The ratings are supported by the company's free cash flow generation, the diversification of its product and customer base, the predictability of its subscription-based recurring revenues and DTN's success in replacing revenues lost through customer churn with increased sales to higher-end users, the agency said.

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