S&P Upgrades Ciena (CIEN) to 'B+'; Outlook Stable

Standard & Poor's Ratings Services raised its corporate credit rating to 'B+' from 'B' on Ciena Corp. (NYSE: CIEN). The outlook is stable.

At the same time, we assigned our 'BB' issue-level rating to the company's new $200 million senior secured term loan and raised our issue-level rating to 'BB' from 'BB-' on the company's existing $250 million senior secured credit facilities. The '1' recovery rating indicates our expectation for very high recovery (90%-100%) of principal in the event of a payment default. We also affirmed our 'B' issue-level rating on the company's senior unsecured debt. The '5' recovery rating indicates that unsecured creditors can expect modest (10%-30%; in the lower end of the range) recovery in the event of a default.

"The rating action reflects our view of Ciena's improved financial risk profile, based on adjusted gross leverage under 5x pro forma for the proposed $200 million term loan B but significantly improving to the low 3x area after the 2017 convertible matures," said Standard & Poor's credit analyst Minesh Shilotri.

The stable outlook reflects our expectation that stable 100G and switching product demand, along with a diversifying customer base, will lead to good revenue growth and improving leverage metrics over the next 12 months, and that the current liquidity of more than $1 billion, along with around $150 million in annual free cash flow, will be sufficient to settle around $830 million of convertible debt maturing in 2017 and 2018.

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