S&P Places Alaska Communications (ALSK) on CreditWatch Positive

Standard & Poor's Ratings Services today placed its 'BB-' issue-level rating on Anchorage-based Alaska Communications Systems Group Inc.'s (ACS's)(Nasdaq: ALSK) senior secured debt on CreditWatch with positive implications.

The CreditWatch placement reflects our expectation for improved recovery prospects for the senior secured debtholders as a result of the company's planned debt repayment.

ACS has agreed to sell its remaining stake in The Alaska Wireless Network LLC (AWN) to GCI Inc. for $300 million. ACS currently owns one-third of AWN, while GCI owns the remaining two-thirds. ACS will use the net cash proceeds from the transaction to repay existing debt.

Our 'B+' corporate credit rating and stable outlook on ACS and its subsidiaries are not immediately affected by the company's agreement to sell its remaining one-third interest in the joint venture.

We estimate that pro forma debt to EBITDA will be in the low-4x area, which is lower than our current base-case forecast of around 5x at year-end 2014. Notwithstanding the reduction in leverage, we do not view this as sufficient enough to revise our "aggressive" financial risk profile assessment, especially since we expect lower levels of free operating cash flow (FOCF) over the next two years, partly due to the elimination of the company's preferred distribution that it receives from the joint venture. Moreover, we expect only modest FOCF generation over the next two years. Despite the approximate $12 million reduction in annual interest expense because of debt repayment, we expect EBITDA to be about $40 million lower in 2015. We also expect capital expenditures of about $40 million, which is only slightly below our original forecast in 2015.

You May Also Be Interested In

• Morgan Stanley Upgrades Macquarie Group Ltd. (MQG:AU) (MQBKY) to Overweight
• Visa (V) Reimagines Payment Acceptance for the ‘Click-and-Mortar' Era
• Global S&P Futures mixed in premarket