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Moody's affirms AT&T, may lift Centennial
Moody's Investors Service said it affirmed the ratings and the stable outlook of AT&T, Inc. and has placed the debt of Centennial Communications Corp. and Centennial Communications Operating Co. on review for possible upgrade, following the news that AT&T intends to acquire the company for total consideration of about $2.8 billion, including Centennial's debt.
The affirmation of AT&T's debt rating is based on management's stated commitment to apply free cash flow to continue paying down debt, including the debt it expects to incur to fund the Centennial acquisition until the company achieves its target leverage metrics.
AT&T has a solid track record of meeting debt reduction targets associated with past acquisitions, the agency said.
Given the increasing secular and macro-economic pressures on the company's wireline businesses, Moody's said it believes that unless AT&T continues to pay down debt, it will have a difficult time maintaining its debt/EBITDA leverage ratio within its 1.3x to 1.5x stated target, or 1.5x-1.7x on a Moody's adjusted basis.
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