Moody's rates Time Warner Telecom loan B1, cuts some ratings

Moody's Investors Service said it assigned a B1 rating to the proposed $200 million five-year senior secured term loan B at Time Warner Telecom Holdings Inc., a wholly owned subsidiary of Time Warner Telecom Inc.

The proposed term loan effectively will be used to refinance the 9.75% Time Warner Telecom Inc. notes due 2008, extending the company's upcoming debt amortization schedule and lowering the company's borrowing cost.

Moody's has also downgraded the $240 million floating-rate notes at Time Warner Telecom Holdings to B2 from B1 to reflect the increased risk of their second-priority lien vis-a-vis the addition of $200 million of first-priority debt. Similarly, Moody's has downgraded the $400 million 10.125% senior notes due 2011 at Time Warner Telecom Inc. to Caa1 from B3 to reflect their increased structural subordination to the higher debt level at Time Warner Telecom Holdings.

The outlook has been changed from negative to stable.

Moody's said Time Warner Telecom's B2 corporate family rating reflects Moody's concerns about fundamental challenges confronting the competitive local exchange carrier industry. The ratings also incorporate the company's strong liquidity, which should allow it to weather several years of modest cash burn.

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