S&P rates Time Warner Telecom debt

Standard & Poor's said it assigned its B rating to Time Warner Telecom Holdings Inc.'s senior secured second-lien floating-rate notes due 2011 and its CCC+ rating to the company's senior unsecured notes due 2014, which total $800 million.

Proceeds will be used to repay $396 million of bank debt as well as call $400 million of 9.75% senior notes at Time Warner Telecom Inc.

Outstanding ratings on Time Warner Telecom, including the B corporate credit rating and CCC+ senior unsecured debt rating, were affirmed.

The outlook was revised to stable from negative.

S&P said the ratings on Time Warner Telecom reflect the company's high business risk (despite the aforementioned sales efforts) in light of continued and potentially higher prospective competition from the incumbent local carriers, as well as the vulnerabilities the company may face in a weak telecom environment. Time Warner Telecom continues to rely on distressed or bankrupt long-distance carriers as customers for an ongoing portion of its overall business.

Despite such pressures, however, the company was able to improve its recurring EBITDA level in 2003 due to aggressive selling efforts, coupled with expense reduction initiatives. As a result, recurring annualized EBITDA for the third quarter of 2003 grew by about 24% from full year 2002 levels, excluding reciprocal compensation settlements, WorldCom settlements and other one-time items.

Total debt to annualized recurring EBITDA improved to 6.3x on an operating lease-adjusted basis for the nine months ended Sept. 30, 2003, versus 7.7x for full-year 2002.

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