Moody's: Dycom outlook negative

Moody's Investors Service said it affirmed Dycom Industries, Inc.'s Ba2 corporate family and probability-of-default ratings, $146 million 8 1/8% senior subordinate notes due 2015 at Ba3 (LGD5, 76%) and speculative grade liquidity rating at SGL-1.

The negative outlook reflects potential for low earnings through 2010 as the weak economy softens demand from cable and telecommunications customers for Dycom's network maintenance and construction related services, according to the agency.

Although cyclical exposure risk has historically been incorporated in Dycom's corporate family rating, the recent earnings falloff exceeded expectation and suggests that total return metrics could decline to levels beneath the Ba2 rating band near term, according to the agency.

The affirmation of Dycom's Ba2 corporate family rating reflects Dycom's low leverage, strong liquidity profile and established market position with its blue-chip customer base, Moody's said. For the 12 months ended Jan. 24, debt-to-EBITDA ratio was 1.7 times.

The affirmation also reflects long-term end-market trends, including increased outsourcing by the major broadband carriers and consumers' need for greater bandwidth, which bode well for long-term demand prospects, the agency noted.

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