NEW YORK-CCPR Services, the principal subsidiary of Cellular Communications of Puerto Rico, was expected to privately place last week a $175 million issue of senior subordinated notes. The deal was trimmed from the $200 million issue originally planned.
Donaldson, Lufkin & Jenrette Securities Corp., New York, is underwriting the issue of 10-year senior subordinated notes, which were to be offered under Securities and Exchange Commission Rule 144A.
The rule permits sale of unregistered securities to large institutional investors in the United States. The coupon on the notes will be 10 percent, and the company expects to raise approximately $200 million in gross proceeds.
Moody’s Investors Service, a New York debt rating agency, assigned a speculative grade rating of B2 to the debt issuance.
“CCPR’s success to date has been achieved in a duopolistic environment against the cellular franchises of the local phone companies in both Puerto Rico and the United States Virgin Islands,” said the Moody’s report, written by James Parrish, managing director, and Eric Goldstein, senior analyst, both in the speculative grade ratings group.
“The operating environment could be characterized as a relatively peaceful coexistence between competitors because the growth in new subscribers has exceeded reductions in monthly and per-minute rates-thus allowing the incumbent cellular provider to maintain profitability while losing market share to CCPR.”
CCPR now has about 47 percent of total market share and 50 percent of all new customer additions, according to Moody’s.
“However, the introduction of two new [personal communications services] providers (Centennial Cellular Corp. and AT&T Wireless Services Inc.) creates a market that near-term may become more competitive [especially]…if the market fails to show significant growth in subscribers,” Moody’s said.
The two new PCS carriers may not fully deploy their systems for at least a year, however. “Centennial has only recently begun its buildout; the time frame for AT&T’s buildout is unknown,” Moody’s said.
A previously announced corporate restructuring will coincide with the sale of the notes. A new holding company, CoreComm Inc., will be formed.
The company’s common stock will automatically become a share of CoreComm common stock on a one for one basis.
The company said the CoreComm stock will have the same rights and powers as Cellular Communications’ common stock.
The company said it expects CoreComm to begin trading on the Nasdaq National Market Feb. 3.
