NEW YORK-Moody’s Investors Service has assigned a speculative grade rating of B2 to a proposed $1.21 billion in secured credit facilities that will be used to fund Centennial Cellular Corp.’s buyout and recapitalization by Welsh, Carson, Anderson & Stowe and Blackstone Capital Partners.
The new debt comprises $975 million attributable to Centennial Cellular Rural Cellular Corp. and $235 million to Centennial Puerto Rico Corp. The latter also plans to refinance $180 million of outstanding indebtedness with some of the new debt.
“The B2 rating on Centennial Cellular (Rural’s) credit facility reflects the incurrence of significant new debt and associated reduction [in] financial flexibility resulting from the proposed buyout and recapitalization by Welsh, Carson and Blackstone-$350 million of contributed equity or less than 20 percent of the pro forma consolidated capitalization,” Moody’s said Aug. 17.
Centennial Cellular Rural had nearly 260,000 domestic subscribers as of May 31, a 5-percent penetration rate, which is half the industry average.
That gives it room for growth in an expanding industry in a coverage area remote from immediate competition from personal communications services networks.
The carrier also has signed several roaming agreements with PCS providers at competitive rates, “which should discourage over-build and further strengthen the contribution from roaming revenues,” Moody’s said.
Centennial Puerto Rico, with about 67,000 customers at the end of February, is a newer carrier “likely to experience more volatile operating performance before it matures,” the New York rating agency said.
“However, the rating also reflects the company’s ability to provide a full range of telecommunications services, including wireless, fixed wireless and competitive [local exchange carrier] services, and its strong prospects for subscriber growth.”
Moody’s also noted that AT&T Wireless Services Inc. “has yet to offer any service since it acquired spectrum to offer PCS in Puerto Rico through [Federal Communications Commission] auctions.”