Moody's: Knology outlook developing

Moody's: Knology outlook developing

	Published : Thu, 11 Jan 2007 00:07 By : Agencies Print this Story

NEW YORK (AFX) - Moody's Investors Service on Wednesday changed Knology Inc.'s outlook to developing following the company's announcement of its $255 million cash acquisition of PrairieWave, a voice, video and high-speed Internet broadband services provider.

The ratings agency said the deal should give Knology greater geographical diversification and potential for margin improvement. Once financing details have been announced, Moody's said it expects to resolve the outlook and individual debt instrument ratings.

Moody's does not anticipate a negative outlook as a result of this transaction.

Knology's B2 corporate family rating reflects the company's lack of scale, financial risk and concerns over competition, offset by the company's upgraded network, high penetration of multiple services, and reasonable diversification of cash flow among its markets relative to other companies of similar size, Moody's said in a research note.

Separately, Standard & Poor's affirmed its ratings, including the 'B' corporate credit rating, for West Point, Ga.-based Knology on news of the purchase. The outlook remains stable.

Total debt was about $273 million as of Sept. 30.

'Although the amount of new debt to fund the acquisition has yet to be determined, our affirmation reflects that Knology can support a modest increase in leverage at the current rating level,' said Standard & Poor's credit analyst Allyn Arden. 'We base this opinion on the company's recent operating performance and our expectations that prospects for discretionary cash flow generation will remain good over the next couple of years.'

With the purchase of PrairieWave, which is also a cable overbuilder, Knology will gain about 56,000 residential and 7,200 commercial customers in South Dakota, as well as portions of Minnesota and Iowa.

Knology shares fell 19 cents to close at $11.04 on the Nasdaq, where the stock has ranged between $3.40 and $12.02 over the past year.