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Moody’s upgrades Columbus bond ratings
Moody’s Investors Service has upgraded Columbus International Inc’s corporate family rating to B2 from B3. At the same time, Moody’s upgraded the ratings on the company’s US$640 million bond due November 2014 and assigned a B2 rating to its new US$1.25 billion bond maturing in 2021. This action concludes the review for upgrade process started on March 19. The outlook on the ratings is stable, Moody’s said. In its ratings rationale, Moody’s said the upgrade was prompted by the placement of Columbus’ proposed US$1.25 billion bond due in 2021, that will result in the elimination of the major liquidity concern caused by the company’s aggressive management of its near-term debt maturities (US$640 million in November). Absent refinancing risk, Moody’s considers that Columbus’ credit profile is in line with a B2 rating category.
Supporting the B2 corporate family rating is the company’s high financial leverage and negative cash flow generation. Its recent history of being active with acquisitions also limits the rating as it poses event and execution risk. As a small telecom operator in Central America and the Caribbean, the company also faces high business risk. These risks are mitigated by significant availability of capacity in Columbus’ state-of-the-art sub-sea network, which offers room to grow revenues with limited competitive risk. Also supportive of Moody’s view is the upside growth potential for its cable TV and telecom business in broadband and the company’s solid market shares in its coverage areas. Proceeds of the US$1.25 billion bond will be used to refinance existing US$850 million in notes maturing in 2014 and 2017, to fund a US$145 million acquisition of a Colombian communications provider and to pay US$100 million in dividends. The balance will be used to pay premiums and fees related with the transaction, and around US$70 million will be kept in cash balances for liquidity purposes. Moody’s notes that the proposed transaction considers additional US$400 million debt, which coupled with extraordinary fees and dividends, will result in a weakened credit profile by the end of 2014.
However, the B2 rating entails Moody’s expectations that the company will be in a position to quickly de-lever as it stands to benefit from revenues and earnings before tax (EBITDA) generated from network upgrades and acquisitions made in recent years. For 2014, Moody’s expects gross debt to EBITDA as adjusted to be at around 4.6x and even lower in following years. Columbus liquidity is now adequate with enough internal sources to fund cash needs while maintaining a modest liquidity buffer, Moody’s said. Columbus International Inc is a privately held telecommunications and cable TV company based in Barbados, better known to consumers as Flow. Columbus provides digital cable television, broadband Internet, digital landline telephony and corporate data services in T&T, Jamaica, Grenada, Curacao and Barbados. During 2013, Columbus’ revenues and adjusted EBITDA margin amounted to US$504 million and 45 per cent, respectively.