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Investing.com -- Moody’s Ratings has upgraded the ratings for CommScope Holding (NASDAQ:COMM) Company, Inc., including the corporate family rating (CFR) to Caa1 from Caa2, and the probability of default rating (PDR) to Caa1-PD from Caa3-PD. The rating action, announced on February 27, 2025, also includes an upgrade of CommScope’s speculative grade liquidity (SGL) rating to SGL-3 from SGL-4.
As part of the same action, Moody’s assigned a B3 rating to the new backed senior secured term loan and backed senior secured notes issued in December 2024 at CommScope’s subsidiary, CommScope, LLC. The existing secured notes were confirmed at B3, while the existing senior unsecured notes at CommScope, LLC and CommScope Technologies LLC were upgraded to Caa3 from Ca. The B3 rating on the backed senior secured term loan due 2026 was withdrawn.
The rating upgrade reflects the company’s successful refinancing of debt due in 2025 and 2026, through a combination of about $2.1 billion in assets sale proceeds and $4.15 billion in new secured debt. Moody’s expects a significant improvement in CommScope’s operating performance that will lead to a reduction in leverage levels well below 9x in 2025. The ratings are constrained by the existing high pro forma leverage (over 10x as of Q4 2024, including Moody’s standard lease adjustments) and the significant amount of debt due in 2027 ($1.6 billion as of Q4 2024).
Despite the challenges, CommScope has significant scale and leading market positions in telecom, broadband, and enterprise connectivity markets. The company’s liquidity is adequate, highlighted by the SGL rating of SGL-3, reflecting cash on the balance sheet of roughly $663 million as of Q4 2024. CommScope also has a $750 million asset based revolving credit facility, which is undrawn following the closing of the Outdoor Wireless Networks (OWN) and Distributed Antenna Systems business (DAS) asset sale in January 2025.
The company’s free cash flow (FCF) was $248 million in 2024. While operating results will improve in 2025, working capital is likely to be a use of cash and capital expenditure ($26 million in 2024) may increase. As a result, FCF levels will be modest in 2025. The company has $1.6 billion of unsecured notes maturing in March 2027 that will impact the liquidity position if the debt is not refinanced well in advance of the maturity date.
The stable outlook reflects Moody’s expectation that CommScope’s leverage will decrease well below 9x driven by strong organic revenue and EBITDA growth as a result of continuing demand for new data centers and more normalized inventory levels. Free cash flow is likely to be minimal in 2025, before improving in 2026.
CommScope Holding Company, Inc., based in Claremont, NC, is the holding company for CommScope LLC, a supplier of connectivity and infrastructure solutions for the wireless industry, telecom service and cable service providers as well as the enterprise market. CommScope acquired ARRIS, one of the largest providers of equipment to the cable television and broadband industries, in 2019. CommScope spun off the Home Network business in 2024 and sold the OWN and DAS operations in January 2025. Reported revenue was approximately $4.2 billion in 2024.
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