TEXT-S&P cuts Broadview Networks Holdings Inc to 'D'
Rating Action On July 23, 2012, Standard & Poor's Ratings Services lowered our corporate credit rating on wireline operator Broadview Networks Holdings Inc. to 'D' from 'CC'. We also affirmed the 'C' issue-level rating on the company's secured notes. The recovery rating on the notes remains a '5', indicating expectations for modest (10%-30%) recovery prospects in the event of a payment default. This action follows the company's announced extension on its revolving credit facility. We expect to lower the issue-level rating on the notes to 'D' once the company files for bankruptcy, or if it misses the Sept. 1, 2012 maturity payment on the notes. Rationale Broadview has obtained an extension of its revolving credit facility maturity date to Sept. 5, 2012 from Aug. 1, 2012. We consider this extension tantamount to a default under our criteria. We base this view on the fact that Broadview has already announced an agreement with two-thirds of its noteholders to restructure their debt, which it plans to implement through a Chapter 11 bankruptcy filing. Moreover, the company has obtained a commitment letter from CIT, its revolving credit lender, to roll the existing revolving facility into a debtor-in-possession (DIP) financing, contingent on a bankruptcy filing by Broadview by Sept. 5. Upon the company's completion of its restructuring, we would expect to raise the corporate credit rating on Broadview. While we will evaluate the company's business plan and financial profile as it emerges, we do not anticipate that the corporate credit rating would be any higher than 'B', given the significant competitive challenges facing the company, our expectations for limited near-term cash-generating ability, and leverage, which we estimate, pro forma for the proposed debt restructuring, to be about 3x. Ratings List Downgraded To From Broadview Networks Holdings Inc. Corporate Credit Rating D/-- CC/Negative/-- Ratings Affirmed Broadview Networks Holdings Inc. Senior Secured C Recovery Rating 5
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