S&P elevates Ciena, rates loan BB

S&P said it raised its issuer credit rating on Ciena Corp. to BB from BB-. The outlook is stable.

At the same time, S&P assigned a BB issue-level rating to the company's proposed $700 million senior secured term loan. The 3 recovery rating on the term loan indicates an expectation for meaningful recovery (50%-70%; rounded estimate: 55%) of principal in the event of a payment default.

S&P said it will withdraw its ratings on the company's existing term loan and the convertibles due 2018 after they are redeemed.

“The rating action reflects our view of Ciena's continued improvements in its business fundamentals, market share gains over the past few years, better operating margins, as well as lower leverage driven by debt reduction and EBITDA growth,” S&P said in a news release.

“Following the proposed $700 million debt issuance, we expect net leverage to be minimal, and the company to generate at least $200 million in annual free cash flow.”

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