S&P: Valor on negative watch

Standard & Poor's said it placed its B+ corporate credit rating on Valor Telecommunications LLC on CreditWatch with negative implications. The ratings for subsidiary Valor Telecommunications Enterprises LLC are not placed on CreditWatch because all of its rated debt will be retired should Valor Telecom complete its proposed recapitalization.

The CreditWatch placement follows Valor Telecom's recent S-1 filing to register income deposit securities (IDS), which comprise class A common stock and senior subordinated notes due in 2014. The company is also expected to put in place a new senior secured credit facility, issue class B common stock, and issue additional senior subordinated notes that are separate from the IDS.

Proceeds from all of the above are expected to refinance essentially all existing bank debt and privately held subordinated debt.

S&P said the IDS structure indicates a more aggressive financial policy for Valor Telecom. Although the amount of the consolidated company's debt outstanding is expected to be relatively unchanged after the IDS offering, Valor Telecom's financial flexibility could be meaningfully reduced by the anticipated high dividend payout rate.

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