Windstream's (WIN) CS&L Stake Sale is Credit-Positive Move - Moody's
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Moody's Investors Service said that Windstream Services, LLC ("Windstream" or "the company") recent announcement that it would monetize 50% of its ownership in Communications Sales & Leasing (Nasdaq: CSAL), raising $309 million is credit positive but does not impact its ratings. The proceeds of the transaction will be used to pay down a portion of the outstanding balance on the company's revolving credit facility. Although Windstream's (Nasdaq: WIN) ratings will not immediately be affected, the transaction favorably impacts the company's credit profile by improving its liquidity position. Moody's also expects Windstream to monetize its remaining stake in CS&L before April of 2017 with 100% of the proceeds used for debt reduction. With approximately $370 million of unsecured notes due in November of 2017, the flexibility provided by a combination of enhanced liquidity and the opportunity to further monetize its CS&L assets mitigates considerable risk related to Windstream's maturity profile.
RATINGS RATIONALE
Windstream's B1 corporate family rating reflects its scale as a national wireline operator with a stable, predictable base of recurring revenues, offset by high leverage, a declining top line and margin pressure. The rating incorporates Moody's view that Windstream's leverage will remain around 5x Debt to EBITDA (Moody's Adjusted) for the next several years. Moody's believes that Windstream faces a continued erosion of EBITDA and cash flows as a result of prior underinvestment. Moody's expects EBITDA to decline in the low single digit percentage range for the next several years, although some of this impact could be offset by expense reduction or the benefits of greater investment into the consumer segment.
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