Moody's: Zayo unchanged after add-on

Moody's Investors Service said Zayo Group LLC's B2 corporate family rating is unchanged following its anticipated $150 million add-on to its term loan due 2024.

The proceeds from the debt issuance will be used for general corporate purposes, including the funding of recent acquisitions, Moody's said.

Zayo has been active with mergers and acquisitions over the last two quarters, the agency said.

In November of 2017, the company announced it would acquire Spread Networks for $127 million, Moody's said.

In January of this year, the company purchased Optic Zoo Networks for $25 million and announced its plans to acquire Neutral Path Communications for $31.5 million, the agency said.

The acquired assets are solid fiber-based networks or routes that are complimentary to Zayo's existing infrastructure, Moody's said.

Despite the strategic rationale for the deals, they come at high valuation multiples, which leads to a perpetuation of elevated leverage and a modest increase in interest expense, the agency said.

Due to the small nominal amount of incremental debt, as well as expected EBITDA growth through synergies, Zayo's credit profile and current rating can absorb these additional negative pressures, Moody's said.

All other ratings, including Zayo's speculative grade liquidity rating of SGL-2 and its stable outlook, are unchanged.

The ratings reflect the company's stable base of contracted recurring revenues and valuable fiber optic network assets, Moody's said.

The company has a strong competitive position due to its extensive network reach, which spans North America and Europe, the agency said.

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