S&P rates Knology notes CCC-

Standard & Poor's said it assigned its CCC+ corporate credit rating to cable overbuilder Knology Inc. and a CCC- rating to the company's proposed $280 million senior notes due 2014.

The outlook is developing.

Proceeds from the notes will be used to refinance Knology's $220.3 million 12% notes and to retire the company's $15.5 million senior secured credit facility.

S&P said the ratings on Knology reflect high financial risk from debt-financed capital spending and operating cash flow losses, limited financial flexibility, rising competitive pressure that the company could face as a cable overbuilder competing with larger and better-financed incumbent operators, and increasing programming costs. The company also faces competition from direct-to-home satellite TV companies and incumbent local exchange carriers for voice service.

Tempering factors include Knology's attractive bundled offerings delivered over upgraded systems, which have helped the company achieve respectable penetration levels and revenue growth. In addition, the smaller markets in which the company operates are somewhat less competitive than larger markets.

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