Fitch cuts Pacnet to negative

Fitch Ratings said it revised Pacnet Ltd.'s outlook to negative from stable.

The agency also said it affirmed its long-term foreign-currency issuer default rating at B+, along with the company's guaranteed $300 million senior secured notes due Nov. 9, 2015 at BB+ with a recovery rating of RR1.

The negative outlook reflects the risk that Pacnet's financial performance may deteriorate due to price competition caused by significant excess submarine cable capacity, Fitch said.

Despite strong demand growth, significant decrease in selling prices is likely to restrict Pacnet's revenue growth to less than 4% again in 2011, the agency said.

The ratings are constrained by its small operational scale and downward pricing trend, although the company's meshed network provides some competitive advantage over other operators' linear networks, Fitch said.

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