S&P cuts U.S. TelePacific to CCC+

Standard & Poor's said it lowered the corporate credit rating on U.S. TelePacific Holdings Corp. to CCC+ from B- and its senior secured first-lien term and revolver to CCC from CCC+. The recovery rating is unchanged at 5.

The outlook is negative.

"The downgrade reflects our heightened concern that the company will be unable to maintain compliance under its tightening financial covenants, most notably the total leverage covenant," S&P analyst Allyn Arden said in a statement, "as well as limited liquidity."

The total leverage covenant tightens to 3.25x at the end of the December 2008 quarter and to 3x at the end of the September 2009 quarter.

"Despite cost-saving initiatives, we remain concerned that continued economic weakness and housing pressure in the California and Nevada markets could result in higher churn," Arden added.

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