CommScope Holding Co Inc.

The stable outlook reflects our view that although macroeconomic weakness related to COVID-19 will delay carrier capital spending and negatively affect credit metrics in the near term, CommScope's revenue will stabilize at current levels and return to modest growth in 2021 as broadband network infrastructure spending starts to recover toward the end of 2020 and U.S. wireless carriers begin to invest in 5G networks in the coming year. Recent expense reductions should support EBITDA margin improvement to the mid-teens in 2021, and we expect the company to sustainably generate positive free cash flow, even if at reduced levels, in 2020. At CommScope's current leverage levels, we would primarily look to potential liquidity concerns as a catalyst for further downgrades. Specifically,

...Leverage has risen considerably to about 8.5x over in 2020, and we do not see deleveraging below 7.5x as likely until 2022 at the earliest. Customer spending delays, a slower-than-expected 5G investment cycle in North America, and macroeconomic fallout from the COVID-19 pandemic hampered CommScope's operating performance through the first nine months of 2020. Although we saw some strength in Broadband Networks in the third quarter and expect revenue and EBITDA to broadly stabilize at current levels, we expect leverage to remain high at over 7.5x through 2021. Wireless carriers have delayed capital spending to preserve capital for the 2020 midband spectrum auction, and although the closure of the Sprint/T-Mobile merger should spur some capital spending, we forecast 5G network buildout to be gradual and not reach significant levels until late 2021. In addition, the impact of the broader COVID-19-related macroeconomic downturn has pressured a number of CommScope's businesses, with weaker-than-expected...

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