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S& Rts Primus Telecom $250 Mil Conv Sub Debentrs CCC.

Business Editors

NEW YORK--(BUSINESS WIRE)--Standard &Poor's

Feb. 17, 2000-- Standard &Poor's today assigned its triple-'C' rating to Primus Telecommunications Group Inc.'s $250 million convertible subordinated debentures due 2007, 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. Execution risk is heightened by the substantial competition and pricing pressures that are characteristic of this business. The company's ability to generate positive cash flows depends largely on its achieving very strong volume growth over the next few years in its targeted European, Asian Pacific, and North American markets.

Primus has expanded its revenue base significantly over the past few years through a series of acquisitions, and its 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& Canada Inc. and ACC Telenterprises. Moreover, acquisition of international carrier LCR Telecom Group, which is expected to close shortly, will add some 10,000 business users to Primus' customer base. These businesses also will assist Primus in reducing its dependence on the carrier business, which accounted for about 28% of the company's revenue base for the three months ended Dec. 31, 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. Primus also signed an agreement with Qwest Communications International Inc. in December 1999 for fiber connectivity and increased bandwidth capacity between Primus' planned and existing U.S. points of presence.

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, as well as Internet-protocol based voice services. Through a combination of internal growth and acquisitions the company has already expanded its Internet service customer base to 200,000 in Australia, Canada, Germany, the U.S., and Brazil.

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 and acquisition efforts over the next few years.

OUTLOOK: POSITIVE

Although Primus' financial profile remains weak, successful implementation of the company's growth plans in the current market should continue to enhance its business position. This, in turn, is expected to result in improved financial measures over the next few years. 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, should enable the company to achieve earnings before interest, taxes, depreciation, and amortization interest coverage of more than 1 times by 2001.--CreditWire
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Publication:Business Wire
Date:Feb 17, 2000
Words:583
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