Windstream Ratings, Stock Not Hurt By Lexcom Purchase

Windstream Corp. (WIN) is buying a small rural telco for $141 million and, so far, its stocks and ratings haven’t been hurt by the plans.

Standard & Poor’s Ratings Services said Wednesday it isn’t changing its view of Windstream, which has a BB+/Negative rating. That’s because Windstream held about $245 million in cash as of June 30 and $493 million in revolving credit.

“We do not expect the acquisition of Lexcom to materially change Windstream's business or financial risk profile,” wrote S&P analysts.

Perhaps that has to do with the size of the acquisition. Lexcom is small. Really small. As S&P points out, the Lexington, N.C.-headquartered LEC owns about 23,000 access lines, or less than 1 percent of Windstream’s base.

But why is Windstream focusing on such small potatoes? The provider now pales in size when compared to rivals Frontier and CenturyLink, and ought to be beefing up its profile with bigger acquisitions. Sure, it bought D&E Communications in May, but, again, that was a minor purchase, although investors didn’t take too kindly to the announcement.

So far, Windstream’s intent to buy Lexcom hasn’t provoked a stock drop, as the D&E news did. The Little Rock, Ark.-based carrier’s shares were up 1.62 percent at $8.78 at 1:31 Eastern on Wednesday.

The Lexcom deal should close in the fourth quarter of this year.