Morningstar New Credit Rating: Equinix

by Morningstar Credit Committee | 17 Sep 10

Morningstar is initiating credit coverage of Equinix with a BB rating, reflecting the firm's relatively high leverage, offset somewhat by solid recurring revenue and a sticky customer base.

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Even with the extension of its maturity profile, we expect Equinix will fall just short of meeting its obligations over the next five years without raising additional funds. This is primarily the result of the fact that the firm is expanding rapidly, pushing free cash flow into the red. We don't expect meaningful cash flow generation for another couple of years. The $700 million in cash the firm has on hand should provide adequate liquidity into 2014 based on our cash flow estimates, though; conversion of any debt to equity would further enhance flexibility.