S&P rates Windstream notes B-, BB-

S&P said it lowered the rating on Windstream Holdings Inc.'s senior unsecured debt at wholly-owned subsidiary Windstream Services LLC to B- from B and revised the recovery rating on this debt to 5 from 4.

The 5 recovery rating indicates 10% to 30% expected default recovery.

S&P also said it assigned a B- rating and 5 recovery rating to Windstream Services' $554 million of 6 3/8% senior unsecured notes due 2023 that were issued in connection with company's completion of certain of its exchange offers. The 5 recovery rating indicates 10% to 30% expected default recovery.

S&P also said it assigned a BB- rating and 1 recovery rating to Windstream Services' $450 million of 8 5/8% senior secured notes due 2025, which includes the company's planned $250 million add-on to the recently issued notes. The 1 recovery rating indicates 90% to 100% expected default recovery.

The proceeds from the $250 million add-on will be used to repay borrowings under the company's secured revolving credit facility due 2020, which has about $1 billion outstanding, the agency said.

The downgrade and lower recovery rating on the existing senior unsecured debt issues are based on an assessment that the increase in secured debt reduces recovery prospects for unsecured creditors in the hypothetical default scenario.

Although the agency said it expects net proceeds from the $250 million add-on will be used to repay borrowings under the company's revolver, the recovery analysis assumes that the facility would be 85% drawn at default, which results in a higher amount of secured debt outstanding at default, S&P said.

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