S&P rates Equinix loan BBB-, notes BB

Standard & Poor’s said it assigned a BBB- rating to Equinix Inc.’s proposed seven-year term loan B.

The term loan commitment will be up to $700 million and will be available in U.S. dollars or British pound sterling.

The recovery rating on the loan is 1, indicating 90% to 100% expected default recovery.

The BBB- rating and 1 recovery rating on the existing credit facility is unchanged.

S&P also said it assigned a BB rating and 3 recovery rating on the company’s proposed $1 billion senior unsecured notes, which will be issued in two tranches. The 3 recovery rating indicates 50% to 70% expected default recovery.

The BB corporate credit rating and stable outlook also are unchanged.

The proceeds will be used to fund the acquisition of TelecityGroup plc, as well as refinance existing debt, the agency said.

Equinix recently received clearance from the European Commission in the acquisition of Telecity, which included certain divestiture requirements, S&P said.

Pro forma for these divestitures, the agency said it expects the company’s adjusted debt-to-EBITDA to increase to about 4.8x in 2016 from 3.9x as of Sept. 30, the agency said.

This compares to a current 5x downgrade threshold for Equinix at the BB rating, S&P said.

Despite the increased leverage, the agency said it views the acquisition as positive for Equinix’s business profile, expanding its footprint and network density in key metro markets across Europe and driving incremental interconnection and cloud-based revenue opportunities.

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