S&P Places Zayo Group (ZAYO) on CreditWatch Positive

December 1, 2016 6:54 AM EST

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S&P Global Ratings placed its 'B' corporate credit rating on Zayo Group LLC on CreditWatch with positive implications.

The CreditWatch follows the announcement that Zayo has entered into a definitive agreement to acquire Electric Lightwave (formerly Integra), a facilities-based provider of communications services, for $1.42 billion. The transaction is projected to close in early 2017. In our view, the acquisition will further increase the scale of the company's fiber network, and generate meaningful cost synergies. We also believe that Zayo is well positioned to take advantage of increasing demand for bandwidth from both carrier and enterprise customers for the foreseeable future.

We plan to resolve the credit watch placement in the coming months following a meeting with management to discuss strategic implications of the acquisition, the new capital structure going forward, and the company's financial policy. We could raise the rating by one-notch if we feel the improvement in the business is enough to offset modest increase in leverage.

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