Moody's cuts Grande Communications to SGL-4

Moody's Investors Service said it lowered Grande Communications Holdings, Inc.'s speculative grade liquidity rating to SGL-4 from SGL-3 and now characterizes its liquidity as weak.

In Moody's view, Grande derives liquidity entirely from internal sources (balance sheet cash and cash from operations), and the downgrade reflects continued depletion of balance sheet cash to a level that Moody's said is insufficient over the next 12 months through December 2006.

Grande has no revolving credit facility, and Moody's estimated that the company finished 2005 with almost $30 million of balance sheet cash.

Grande pre-funded its business plan through the issuance of about $130 million of senior secured notes in early 2004. Proceeds exceeded the amount required to refinance existing debt, leaving the company with excess cash to support its market build-out and growth strategy.

Moody's said the company has continued to absorb cash, consuming roughly $40 million of cash (after debt service and capital expenditures) in the trailing 12 months through September.

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