--Cogent Communications gets B- preliminary rating from S&P

Internet Business News
01-11-2011
--Cogent Communications gets B- preliminary rating from S&P

INTERNET BUSINESS NEWS-(C)1995-2011 M2 COMMUNICATIONS

11 January 2011 - S&P on Monday set a B- corporate credit rating with a "stable" outlook, on a preliminary basis, to US Internet service provider Cogent Communications Group (NASDAQ:CCOI).
At the same time, the service rated at B- with a recovery rating of 4 the company's USD150m (EUR116m) notes due 2018. The recovery rating denotes average (30%-50%) recovery prospects in a payment default.

"The preliminary ratings on Cogent reflect what we consider its highly leveraged financial risk profile after the proposed debt transaction," said Standard & Poor's credit analyst Gregg Lemos- Stein, "including our expectation for high debt burden and only marginally positive free operating cash flow for the next few years."

The rating also incorporates the firm's "vulnerable" business risk profile, given its high churn and competitive pressure.

Still, analysts expect some revenue expansion over the next couple of years due to clients' increasing use of online services that would lower the company's leverage to 5x from the end-December 2010 level of 5.6x.

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(Copyright M2 Communications, 2011)