Fitch rates Pacnet notes BB

Fitch Ratings said it assigned a final rating of BB with a recovery rating of RR1 to Pacnet Ltd.'s $350 million senior secured guaranteed notes due 2018.

The assignment of the final rating follows the completion of the bond issuance and receipt of documents conforming to the information previously received, Fitch said.

The final rating is in line with the expected rating initially assigned June 10, 2013, the agency said, and restated Nov. 25 prior to re-marketing of the bonds.

The notes are subordinated to any future debt raised at non-guarantor subsidiaries, Fitch said. However, the agency said it understands that the company has no plans to raise such funds.

The notes are jointly and severally guaranteed by all of Pacnet's main income-generating subsidiaries, Fitch said.

Low profitability, strong competition from better capitalized market participants, weak financial position and high execution risk of its data-center strategy will continue to constrain Pacnet's ratings, the agency said.

Pacnet competes with large telecoms incumbents in its primary service offerings, such as managed data-connectivity solutions, Fitch said.

The agency said it expects further improvement in Pacnet's EBITDA to be slow in the next few quarters and there is considerable execution risk associated with the newly completed and currently planned data centers in Singapore, China, Hong Kong and Korea.

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