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Technology Stocks : Winstar Comm. (WCII) -- Ignore unavailable to you. Want to Upgrade?

To: DubM who wrote (8941)	10/26/1998 12:41:00 PM
From: MangoBoy	Read Replies (1) \| Respond to of 12468

[S&P revises WinStar Communications outlook] NEW YORK, Oct 26 - Standard & Poor's today affirmed its outstanding ratings on Winstar Communications Inc. and Winstar Equipment Corp. (see list below). Standard & Poor's also assigned its ratings to the two companies (see list below). The outlook is also revised to positive from stable. The rating actions affects about $1.7 billion in total debt and preferred stock as of June 30, 1998 (see list). The outlook revision reflects the substantial improvement in financial flexibility afforded the company by its recent receipt of a $2 billion vendor financing commitment from Lucent Technologies, to be made available in $500 million increments. The one year interest deferral provision and four year principal repayment deferral provide favorable financing terms that will enable Winstar to fully fund expansion beyond its current 40 market buildout plans through 1999 into as many as 60 additional markets. Market expansion of this magnitude holds the potential of improving overall operating margins, given the economies of scale realizable from network deployment over a larger customer base. Winstar faces substantial business risk as a competitive local exchange carrier. Winstar utilizes high frequency radio spectrum to provide telecommunications services primarily to office buildings that do not have access to fiber optic networks. This application of radio spectrum is relatively new, and customer acceptance remains limited to date. As such, current annualized revenues from the competitive local exchange carrier (CLEC) business totals only about $160 million, and many of Winstar's markets are already serviced by other CLECs. But since Winstar's time to market is a critical concern, because such buildings could become targets for fiber hook up over the longer term, the Lucent transaction is a favorable development since it enables Winstar to accelerate network build out in these markets. Services are provided both to end-user customers and other carriers. The company currently provides services in about 27 markets, and plans to buildout throughout 1999 to expand its geographic footprint substantially. Given the operating and capital associated with the company's expansion plans through year end 1999, positive levels of earnings before interest, taxes, and depreciation (EBITDA) are not expected to be generated until 2000. To improve operating margins through volume expansion, the company purchased switching facilities from the bankrupt US One Communications Corp. and the assets of bankrupt long distance reseller MIDCOM Communications in late 1997 and early 1998, respectively. Winstar has also purchased various other assets in order to expand its network capabilities and customer base, including acquisition of internet provider Goodnet. Despite cash requirements for acquisitions and capital expenditures, the company's aggressive financing activities in the last several years has resulted in cash and short term investment balances of over $700 million as of June 30, 1998. OUTLOOK: POSITIVE Winstar's ability to expand into additional markets increases will be substantially improved by its access to up to $2 billion in additional funds from the Lucent vendor financing. Given such extensive financial flexibility, Winstar could materially improve its financial profile over the next two-to-three years, Standard & Poor's said. OUTSTANDING RATINGS AFFIRMED Rating Winstar Communications Inc. Corporate credit rating B- $100 million unsecured notes due 2005 CCC+ Winstar Equipment $200 million senior secured notes due 2004* CCC+ RATINGS ASSIGNED Winstar Communications $200 million senior subordinated notes due 2008 CCC $250 million senior subordinated deferred interest notes due 2008 CCC $100 million senior subordinated deferred interest notes due 2007 CCC $175 million series C senior cumulative exchange preferred stock CCC $200 million series D cumulative convertible preferred stock CCC Winstar Equipment $50 million guaranteed senior secured exchange notes due 2004 * CCC+ *Guaranteed by Winstar Communications Inc.