S&P gives Ribbon, loans B-

S&P said it assigned B- ratings to Ribbon Communications Operating Co. and its new $65 million revolving credit facility and $325 million term loan. The outlook is stable.

“Ribbon's low unadjusted free operating cash flow (FOCF) generation keeps its financial risk high. Over the past three years as interest expense has increased, Ribbon has generated low absolute FOCF. Ribbon has also been investing heavily in its IP (internet protocol) optical research & development (R&D). Ribbon's FOCF generation was around $2 million in 2021 and around $6 million in 2023,” S&P said in a statement.

However, the agency said it considers Ribbon’s capital structure sustainable.

“Its new debt amortization payment from this new term loan is roughly $3.3 million, and we project interest expense of $31 million in 2024. We believe revenue will grow mid-single-digit percent year over year in 2024 as a strong IP optical segment helps grow its revenue. We think that Ribbon's EBITDA margins will improve as supply chain costs decrease and investments for growth stabilize such that it can improve its EBITDA margins more than 200 basis points (bps) in 2024,” S&P said.

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