Moody's rates Grande Communications

Moody's Investors Service said it assigned a Caa2 rating for the proposed $125 million of guaranteed senior unsecured notes due 2014 to be issued by Grande Communications Holdings Inc. Moody's also assigned a Caa1 senior implied rating, a Caa2 issuer rating, and an SGL-3 speculative grade liquidity rating.

The outlook is stable.

Moody's said the ratings for Grande broadly incorporate the company's high perceived financial and business risk.

The ratings reflect a high level of financial leverage and modest coverage of interest at closing; considerable execution risk associated with the company's overbuild strategy; the cash absorptive nature of operations as projected given a meaningful amount of planned capital expenditures for network expansion; and very limited financial flexibility resulting from declining liquidity and the absence of a committed backstop liquidity facility, which is further compounded by comparatively weak and/or limited access to capital in Moody's estimation.

Moody's noted the ratings benefit, however, from the company's technologically advanced network, which is capable of delivering a full bundle of services including video, telephony and high speed internet access; sufficient capacity on the network to deliver a wide range of incremental services going forward; opportunistic market share grabs at some level as the company expands into higher demographic areas with its new build program; and the prospect of growing ARPU and EBITDA per subscriber as RGUs grow and the company increases the number services taken by each incremental subscriber.

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