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S&P rates Hughes Network notes B-, upgrades loan
Standard & Poor's said it assigned a B- rating to Hughes Network Systems LLC's proposed $375 million senior unsecured notes due 2014, upgraded the company's senior secured bank loan to BB- with a recovery rating of 1 from B with a recovery rating of 3 and affirmed the B corporate credit rating.
The outlook was revised to stable from negative following the removal of covenant compliance issues related to the bank loan, which, except for a $50 million revolver, will be refinanced with the notes issue. The remaining note proceeds will be used to fund an additional $39 million to balance sheet cash.
S&P said the ratings continue to reflect competitive telecommunications industry conditions, mature revenue prospects for core enterprise services, uncertain growth potential for small business and consumer applications given rising competition from faster, more economical phone and cable TV company data alternatives, the company's leveraged financial profile (gross debt to EBITDA of about 5.3x) and potential operating and financial risk from the Spaceway broadband satellite project.
Tempering factors include the company's leading position in the very small aperture terminal (VSAT) industry, a degree of revenue stability from three-to-five year contracts with large enterprise customers, VSAT's ability to provide ubiquitous, point-to-multipoint connectivity, which partly buffers competitive pressure from terrestrial networks, and good customer and geographic diversity, the agency said.
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