Moody’s downgrades Uniti

Moody's Investors Service said it downgraded Uniti Group Inc.'s corporate family rating to Caa2 from Caa1 following the downgrade of Windstream Services, LLC.

As Uniti's largest tenant and main source of revenue, Windstream's credit profile influences the ratings and outlook of Uniti, the agency said.

The downgrade of Windstream was prompted by the U.S. District Court Southern District of New York’s ruling on Feb. 15 against Windstream in a case involving Aurelius Capital Management and U.S. Bank NA.

The court concluded that Aurelius is entitled to the relief it seeks, awarding a money judgment in an amount of about $310 million plus interest.

Moody's said it views this legal outcome for Windstream as a negative that increases default risk and impairs refinancing actions that might have further strengthened its balance sheet in the intermediate term.

The agency also downgraded Uniti's probability of default rating to Caa2-PD from Caa1-PD, its senior secured debt rating to Caa1 from B3 and its unsecured debt rating to Ca from Caa3.

Uniti's speculative grade liquidity rating remains at SGL-3, but the agency noted that liquidity could be negatively impacted if lease payments from Windstream are renegotiated meaningfully lower under default or restructuring scenarios.

The outlook remains negative.

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