Windstream wants $1 billion in bonds and loans to help refinance some of its massive $9 billion debt.
The communications giant said Tuesday that it will seek $300 million in loans to cover a payment that comes due this summer. It also plans to sell $700 million of senior unsecured notes that come due in 2023 to fund a tender offer of $650 million for old PAETEC debt that matures in 2017.
Windstream bought PAETEC for $2.3 billion in 2011.
Moody's, the investors service, isn't impressed by the move. The firm changed Windstream's outlook from stable to negative, citing a lack of progress in reducing debt and saying that the company is too loose with its dividends.
"Windstream's high dividend consumes the majority of its discretionary free cash flow and pressures the company's ability to reinvest in capex or repay debt to materially reduce leverage," said Mark Stodden, Moody's analyst. Moody's said that will make Windstream vulnerable to telecom and cable competitors in the coming years.
"Further," Stodden said, "low capital spending could negatively impact margins and lead to weaker EBITDA, as the company may rely more heavily upon leased facilities outside its ILEC footprint."
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