Moody's ups GCI view to stable

Moody's Investors Service said it affirmed GCI Inc.'s Ba3 corporate family rating and B1 senior unsecured debt rating and changed the outlook to stable from negative. The ratings take into account the company's Ba3 probability-of-default rating and a loss-given-default assessment of LGD5 for the senior unsecured notes.

The outlook change to stable reflects Moody's expectations that GCI is likely to grow its operating profit and free cash flow very modestly over the next few years, but that much of its cash flow is likely to be directed towards share repurchases, limiting debt reduction.

The ratings reflect GCI's strong incumbent market position within the Alaskan long distance, cable television and Internet service markets, with a growing share of local access lines.

The agency said the ratings also reflect its view that the Alaskan market is small and the company's exposure to long distance revenues is relatively high, which limits its growth potential and decreases the certainty of expected results over the medium term. The rating incorporates GCI's stated willingness to meaningfully increase its leverage from current levels of roughly 3.5 times and Moody's belief that the company is unlikely to reduce its leverage in any event, as it directs free cash flow to shareholders via share repurchases.

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