Fitch affirms Windstream

Fitch Ratings said that it affirmed Windstream Corp.'s issuer default rating at BB+ after the company announced a deal to buy CT Communications, Inc. for $585 million.

The outlook is stable.

Fitch said that despite some increased leverage with the deal, the leverage is expected to remain at BB+ levels. For the year ended March 31, CT reported a 32% ratio of EBITDA to revenue, or about $57 million of EBITDA on $179 million of revenue. Windstream has said that it expects to see $30 million in annual cost synergies in the first full year of operation after the deal closes, Fitch said.

The agency said that it expects the company to raise some of the financing through long-term debt. As of March 31, Windstream had $398 million in cash and its $500 million revolving credit facility due July 2011 was undrawn. And the company's debt maturities for the next several years are nominal, Fitch said, including the required amortization of the $1.9 billion outstanding on its term credit facilities.

The ratings also incorporate the company's operating cash flow prospects, stable credit protection metrics and access to liquidity, Fitch said. Windstream's business is expected to be stable because of its rural operations, which insulates it from competition. Its dividend payout ratio as a percentage of its net free cash flow is estimated at between 70% and 75%. The leverage ratio is also expected to be stable, with its debt-to-EBITDA ratio at 3.2x to 3.3x over the next few years.

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