S&P rates Equinix convertibles CCC+

Standard & Poor's said it assigned a B corporate credit rating to Equinix Inc. and CCC+ ratings to its $250 million convertible subordinated notes due 2012 and proposed $300 million convertible subordinated notes due 2014.

The outlook is positive.

Proceeds from the proposed $300 million note issue and an expected concurrent $300 million common stock offering will be used to fund the estimated $550 million acquisition of IXEurope.

The ratings reflect the company's aggressive leverage and the significant risks of Equinix's capital-intensive, highly competitive industry niche, S&P said. The company offers space, power, utilities and cross-connects in buildings for various network operators, content companies and enterprises to interconnect and exchange traffic.

These data centers' primary cost components are rent, engineering and security, power and electricity. The agency said that because most of these costs are fixed, this business has very favorable operating leverage characteristics as new customers are added, and gross profit margins can exceed 65%.

The agency said the notes are rated two notches below the corporate credit rating due to the substantial concentration of priority obligations in the capital structure.

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