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Moody's downgrades Uniti
Moody's Investors Service said it downgraded Uniti Group Inc.'s corporate family rating to Caa1 from B3 following the downgrade of Windstream Services, LLC.
Moody's also downgraded Uniti's probability of default rating to Caa1-PD from B3-PD, senior secured debt rating to B3 (LGD 3) from B2 (LGD 3) and unsecured debt rating to Caa3 (LGD 5) from Caa2 (LGD 5). Uniti's speculative grade liquidity rating was affirmed at SGL-3.
The outlook remains negative.
As Uniti's largest tenant and main source of revenue, Windstream's credit profile significantly influences the ratings and outlook of Uniti, Moody's explained.
The downgrade of Windstream reflects that company's expected failure to meet its debt-service obligations due to its commencement of debt-exchange offers at significant discounts to par value with respect to certain series of its senior notes for second-lien notes, the agency said.
Based on final acceptance levels and exchange allocations, Moody's said it expects this would constitute a distressed exchange and would represent a material amount of unsecured debt, likely totaling 12% or more of outstanding funded debt.
The agency said it views this planned action as evidence that Windstream's weak operating trends are worsening and that the company's ability to transition to stable EBITDA is proving more difficult than previously anticipated.
Moody's also said it believes that Windstream's capital structure has become untenable and these exchanges aim to help the company delay or potentially avoid future payment defaults.
With only marginal revenue diversity, the business and credit risk at Windstream will weigh heavily on Uniti, the agency said.
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