Stock Markets June 15, 2026 05:15 PM

S&P Raises Viavi Solutions to BB After Term Loan Repayment

Rating upgrade follows equity raise that eliminated term loan B and materially reduced priority debt, with S&P citing improving leverage and data-center driven revenue growth

By Derek Hwang
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S&P Global Ratings upgraded Viavi Solutions Inc. to BB from B+ after the company used proceeds from a $575 million common stock offering in May 2026 to repay all outstanding borrowings under its term loan B. The ratings firm also increased the issue-level rating on Viavi's senior unsecured debt to BB, with a recovery rating of 3, reflecting a materially lower amount of priority debt. S&P expects leverage to fall sharply and for earnings and cash flow to strengthen over fiscal 2026 and fiscal 2027, supported by integration of recently acquired Spirent assets and rising demand from data center ecosystem customers.

S&P Raises Viavi Solutions to BB After Term Loan Repayment
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Key Points

  • S&P upgraded Viavi's corporate rating to BB from B+ after the company repaid all term loan B borrowings using proceeds from a $575 million equity offering.
  • S&P now expects adjusted debt/EBITDA of about 2.8x at the fiscal year-end June 27, 2026 close, improving to an estimated 2.2x in fiscal 2027, and raised the issue-level senior unsecured rating to BB with a recovery rating of 3.
  • Sectors influenced by the development include data center ecosystem suppliers, network test and service enablement providers, and corporate credit markets for communications equipment firms.

S&P Global Ratings moved Viavi Solutions Inc.'s corporate credit rating up to BB from B+ on Monday after the company repaid all remaining borrowings under its term loan B. The repayment was financed with net proceeds from a $575 million common stock issuance completed in May 2026. In tandem, S&P raised its issue-level rating on Viavi's senior unsecured debt to BB and assigned a recovery rating of 3, citing the significantly reduced level of priority debt following the repayment.

In its rationale, S&P said it now expects Viavi's adjusted debt-to-EBITDA ratio to be about 2.8x at the close of the fiscal year ending June 27, 2026. That represents a substantial improvement versus the agency's prior projection of 5.5x. The ratings firm further forecasts continued earnings-driven deleveraging to roughly 2.2x in fiscal 2027.

S&P noted that Viavi paid down the debt taken on to finance its acquisition of Spirent Communications PLC assets in less than a year after that debt was issued. The rating agency maintained a stable outlook, reflecting its view that leverage should move down into the low-2x range over the next 12 months as several factors converge - ramping hyperscaler demand, the first full year of Spirent asset integration, and the scheduled roll-off of restructuring expenses.

On cash generation, S&P projects Viavi will report free operating cash flow of $60 million to $70 million in fiscal 2026 and $160 million to $170 million in fiscal 2027. Those projections are premised on an improved earnings profile together with moderate working-capital outflows and capital expenditures.

The ratings firm estimated that the Spirent assets will add about $200 million in annual run-rate revenue, which S&P said should boost Viavi's earnings potential. It also expects modest margin expansion as higher-margin Spirent assets are integrated - S&P cited approximate 70% gross margins for the Spirent assets compared with Viavi's reported gross margin of 57.3% in fiscal 2025. S&P flagged that the scheduled roll-off of roughly $32 million in associated restructuring costs in fiscal 2026 will provide additional incremental margin support.

S&P's outlook for top-line growth is similarly positive. The agency projects organic revenue growth of about 19% in fiscal 2026 and roughly 14% in fiscal 2027, driven primarily by stronger demand from data center ecosystem customers. That customer cohort - which S&P defines to include hyperscalers, optical module and system manufacturers, and silicon vendors - now makes up nearly half of sales in Viavi's Network and Service Enablement segment, up from around 30% at the end of June 2025.

The upgrade and revised credit metrics underscore S&P's assessment that deleveraging and improved earnings quality should lower Viavi's risk profile over the next year, contingent on the company realizing the demand and integration dynamics described in the ratings commentary.

Risks

  • S&P's upgraded outlook and projected leverage trajectory rely on sustained ramping demand from hyperscalers and other data center ecosystem customers - if that demand does not materialize, leverage improvement may be slower than forecasted.
  • Realization of the projected free operating cash flow and margin gains depends on successful integration of the Spirent assets and the expected roll-off of approximately $32 million in restructuring costs in fiscal 2026; integration setbacks or persistent restructuring expenses could limit expected benefits.
  • The agency's cash flow and earnings forecasts assume moderate working capital outflows and capital expenditures; larger-than-expected working capital needs or higher capital spending could reduce reported free operating cash flow versus S&P's projections.

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