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Equinix, Inc. -- Moody's assigns Baa3 rating to Equinix's proposed senior unsecured notes

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Rating Action: Moody's assigns Baa3 rating to Equinix's proposed senior unsecured notesGlobal Credit Research - 24 Feb 2021New York, February 24, 2021 -- Moody's Investors Service (Moody's) has assigned a Baa3 rating to Equinix, Inc.'s (Equinix) proposed Eurodollar senior unsecured notes expected to be issued in two separate maturity tranches. Net proceeds from the offering will be allocated to a portfolio of eligible green projects including green buildings, renewable energy, energy efficiency and sustainable water and wastewater management investments. Pending the full allocation of proceeds towards eligible green projects, a portion of the net proceeds is expected to be used to retire existing senior unsecured debt. The Baa3 rating is in line with the existing rating for Equinix's unsecured debt class. The company's bank facilities (unrated) are unsecured obligations and rank pari passu with the unsecured notes. All other ratings, including Equinix's Baa3 rating on the company's existing senior unsecured notes, are unaffected by the proposed transaction. The outlook is stable.Assignments:..Issuer: Equinix, Inc.....Senior Unsecured Regular Bond/Debenture, Assigned Baa3RATINGS RATIONALEEquinix's Baa3 senior unsecured rating is supported by Equinix's position as the leading global independent data center operator offering carrier-neutral data center and interconnection services to large enterprises, content distributors and global internet companies. Equinix benefits from its global competitive position, increasing asset coverage, and more disciplined and balanced debt and equity funding strategy to support organic and M&A-driven business growth and to fund annual cash flow deficits due to high capital spending and steadily rising dividend payments associated with its real estate investment trust (REIT) tax status. Moody's notes that Equinix's dividend payout ratio as a percentage of adjusted funds from operations (AFFO), a non-GAAP financial measure commonly used in the REIT industry, has historically been in the mid 40% range which is more conservative relative to many other REITS.The company's credit profile also incorporates still favorable near-term growth trends for data center services across the world, the company's stable base of contracted recurring revenue, low churn, scale and strategic real estate holdings in key communications hubs. Equinix's substantial asset portfolio and qualitative business strengths are supportive of higher leverage tolerance for its rating. These positive factors are offset by significant industry risks as data center business models continue to evolve, intense competition from strategic and financial operators, relatively high capital intensity and a history of opportunistic M&A which could delay more significant deleveraging if primarily debt funded.Equinix has good liquidity for the next 12-18 months. As of December 30, 2020, the company has approximately $1.6 billion of cash on hand and approximately $1.9 billion available under its $2 billion revolver. Moody's estimates that Equinix will pay around $1 billion in cash dividends during 2021, growing in future periods. Moody's expects dividends will exceed internally generated cash and capital spending for at least the next two years, and that the company will continue to rely upon a balanced mix of debt and equity capital to finance these annual deficits. Equinix has a $1.5 billion at-the-market (ATM) equity offering program currently available to optimized equity capital raises. Although unlikely, Equinix also has the option of sale leasebacks of its facilities to generate additional liquidity.The stable outlook reflects Moody's belief that net leverage will fall towards 4.5x (Moody's adjusted) over the next 12 to 18 months. Moody's expects Equinix will continue to fund growth and cash flow deficits with a prudent and balanced mix of debt and equity capital.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSMoody's could upgrade Equinix's ratings if net leverage is expected to be sustained below 4.5x (Moody's adjusted), the company continues to use a meaningful amount of equity to fund its annual cash deficits and operating performance is expected to remain strong.Moody's could downgrade Equinix's ratings if net leverage is sustained above 5.0x (Moody's adjusted) for an extended time frame, if liquidity deteriorates or if the company's operating environment sustainably deteriorates due to competitive or other factors.The principal methodology used in these ratings was Communications Infrastructure Industry published in September 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1076924. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.Headquartered in Redwood City, CA, Equinix, Inc. is the largest publicly traded carrier-neutral data center provider in the world with 227 data centers operating in 63 metro markets across the Americas, EMEA and Asia-Pacific. With the most networks, clouds and IT services companies on one platform, Equinix connects its more than 9,500 customers to their customers and partners utilizing over 1,800 networks.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Neil Mack, CFA Vice President - Senior Analyst Corporate Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Lenny J. Ajzenman Associate Managing Director Corporate Finance Group JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 © 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. 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