S&P rates Zayo notes B-

Standard & Poor's said it assigned a first-time corporate credit rating of B to Zayo Group LLC and a B- issue-level rating with a recovery rating of 5 to the company's proposed $225 million of senior secured first-priority notes due 2017.

The outlook is stable.

The agency said the ratings on Zayo reflect a highly leveraged capital structure, expansion risk as S&P expects the company to remain an aggressive consolidator of regional fiber-based telecom networks, significant capital expenditure requirements to grow the fiber-to-the-tower business and the company's small scale and lack of geographic diversification.

Tempering factors include its niche position within the regional-based telecom network sector serving smaller, less competitive markets and predictable revenue stream with sizable contractual revenue backlog, S&P said.

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