S&P: Equinix Inc. Upgraded To 'BB+' On Favorable Business Conditions; Outlook Stable
At the same time, we raised our issue-level ratings on the company's secured debt to 'BBB' from 'BBB-'. The recovery rating remains '1', indicating our expectation for substantial recovery (90%-100%) in a payment default scenario. We also raised our issue-level ratings on the company's unsecured debt to 'BB+' from 'BB'. The recovery rating remains '3', indicating our expectation for meaningful (30%-50%; upper end of the range) recovery in the event of a payment default.
"The upgrade reflects our belief that Equinix's network and cloud-dense environment positions the company well to take advantage of rising demand for data centers driven by increased IT outsourcing by enterprises, data growth, and increased application complexity," said S&P Global Ratings credit analyst Chris Mooney.
Equinix has steadily expanded over the years, both organically and through acquisitions, more than doubling its revenue base since 2011. The company now operates 146 data centers in 40 markets across North America, Europe, and Asia making it the largest retail colocation provider globally with a 14% share of the growing market. We believe Equinix's significant scale enhances the value of its overall ecosystem, allowing customers to interconnect to other enterprise, network and cloud customers--which we believe will become more prevalent in the future as businesses, networks, machines, and data become increasingly more connected--while its global footprint attracts multinational customers. As a result, we anticipate that Equinix will outpace overall retail colocation market growth of 8%-10% over the next several years.
The outlook is stable. We expect adjusted net debt to EBITDA to improve modestly to the low-4x area over the next year as earnings growth is partly offset by lower cash balances and possibly revolver borrowings to fund capital investments, acquisitions, and dividend distributions.