S&P affirms Primus Telecommunications Grp
(Press release provided by Standard & Poor's)
NEW YORK, Sept 23 - Standard & Poor's today assigned its single-'B'-minus rating to Primus Telecommunications Group Inc.'s $200 million senior notes due 2009, to be issued as a 144A offering with registration rights.
At the same time, Standard & Poor's affirmed its single-'B'-minus corporate credit and senior unsecured debt ratings on Primus.
The senior unsecured debt rating on the public debt issues incorporates the expectation that there will not be a material amount of secured debt in the capital structure.
The outlook is positive.
The ratings on Primus reflect the substantial challenges that this provider of international and domestic long-distance service faces in developing a business of sufficient size to service its significant debt burden.
The company's ability to generate positive cash flows depends largely on it achieving very strong volume growth over the next few years in its targeted European, Asian Pacific, and North American markets.
The company has expanded its revenue base significantly over the past few years through a series of acquisitions, and its 1999 and 2000 revenue levels will benefit from 1999 acquisitions that include the 350,000 retail customer base and assets of international telecommunications provider Telegroup Inc. and the residential long-distance customer base and residential Internet customers of AT&T Canada Inc. and ACC Telenterprises.
These businesses also will assist Primus in reducing its dependence on the carrier business, which accounted for about 33% of the company's revenue base for the three months ended June 30, 1999.
Primus focuses on the international long-distance market and is investing in the acquisition of facilities to switch and carry traffic.
To this end, it has entered a reciprocal capacity purchase agreement with Global Crossing Holdings Ltd. that will enable Primus to purchase fiber capacity from Global Crossing and allow Global Crossing to purchase Primus' satellite services.
Greater facilities ownership and higher traffic levels already have begun to improve operating efficiencies and profitability.
The company has also increased its focus on the data services sector through formation of a separate subsidiary to target business and residential customers for data and Internet services.
Primus faces formidable competition from much larger, entrenched telecommunications companies in a dynamic pricing environment.
The current sharply declining trend in prices for international telephone calls is likely to continue, and competition is increasing.
The rating incorporates the expectations that Primus will be able to raise substantial additional funds through a balanced mix of debt and equity to support its market expansion plan over the next few years; to this end, the company plans to issue about $150 million through an equity offering in the near term.
OUTLOOK: POSITIVE
Successful implementation of the company's growth plans in the current market and regulatory environment should continue to enhance Primus' business position.
The ongoing ramp up of Primus' revenue base, coupled with greater on-network traffic and higher operating cash flows from the more profitable data services segment over the next few years, should enable the company to achieve earnings before interest, taxes, depreciation, and amortization interest coverage exceeding 1 times by 2001, Standard & Poor's said. |
