American Cellular $1.75B Sr Secd Crdit Fac Rtd B+.Business Editors NEW YORK--(BUSINESS WIRE)--Standard & Poor's Feb. 23, 2000-- Standard & Poor's today raised its corporate credit rating on American Cellular Corp. to single-'B'-plus from single-'B'. Standard & Poor's also withdrew its triple-'C'-plus rating on American Cellular's senior unsecured notes, which are being refinanced. These ratings are removed from CreditWatch, where the had been placed with positive implications in October 1999. The CreditWatch placement followed the company's agreement to be acquired by a joint venture between Dobson dob·son n. See hellgrammite. [Probably from the name Dobson.] Noun 1. dobson - large brown aquatic larva of the dobsonfly; used as fishing bait hellgrammiate Communication Corp. and AT&T Corp. In addition, Standard & Poor's assigned its single-'B'-plus rating to American Cellular's new $1.75 billion senior secured credit facilities credit facilities npl → facilidades fpl de crédito credit facilities npl → facilités fpl de paiement credit facilities . The outlook is positive. Although the new capital structure will increase American Cellular's debt leverage modestly on a trailing basis, the rating upgrade reflects some imputed Attributed vicariously. In the legal sense, the term imputed is used to describe an action, fact, or quality, the knowledge of which is charged to an individual based upon the actions of another for whom the individual is responsible rather than on the individual's financial flexibility from AT&T as well as solid operating trends at American Cellular. On a pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma basis, debt to cash flow is high at about 9 times (x), but could decline over the next few years as the company will be generating free cash flow in excess of operating needs. American Cellular is a rural cellular wireless operator operating in four main clusters in the U.S. covering about 4.9 million population equivalents. The company had about 400,000 subscribers at the end of September 1999, representing only an 8% penetration. Churn has been good at less than 2% per month, indicating the stability of the customer base. Also, the company faces relatively less competitive threats from new personal communications services See PCS. (PCS (1) (Personal Communications Services) Refers to wireless services that emerged after the U.S. government auctioned commercial licenses in 1994 and 1995. This radio spectrum in the 1. ) entrants given the low population density of its rural territories. Under the terms of the 50/50 joint venture between Dobson and AT&T, Dobson will manage the day-to-day operations of American Cellular. Dobson is a rural cellular operator of about equal size, which just completed an initial public offering in January 2000. The company has been an aggressive acquirer of cellular properties over the past three years, and has a demonstrated track record in integrating acquisitions and improving operating performance. Opportunities exist to increase penetration in the American Cellular properties, as Dobson intends to continue to build out the network, increase marketing spending, and complete its conversion to an all-digital TDMA (Time Division Multiple Access) A satellite and cellular phone technology that interleaves multiple digital signals onto a single high-speed channel. For cellular, TDMA triples the capacity of the original analog method (FDMA). platform. A new roaming agreement was completed with AT&T, which calls for declining rates until 2004. To date, lower per-minute roaming rates have been offset by increased minutes of use. Roaming revenue accounts for about 40% of American Cellular's voice traffic in 1999. Financial flexibility is adequate, as the company is expected to generate operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. in excess of required capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. . In addition, about $75 million will be available on the company's $300 million revolver at closing. Capital expenditures in 2000 are estimated at about $70 million, the majority of which will be used to build additional cell sites and increase digital capacity of the network. Earnings before interest, taxes, depreciation, and amortization Earnings before interest, taxes, depreciation, and amortization (EBITDA) A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. coverage of interest expense is expected to be in the 1.5x area in 2000. The bank loan is rated the same as the corporate credit rating. Lenders can expect some recovery in the event of a default or bankruptcy, based on Standard & Poor's simulated default scenario. However, it is not clear that a distressed enterprise value would be sufficient to cover amounts outstanding under the fully drawn facility. OUTLOOK: POSITIVE Upside Upside The potential dollar amount by which the market or a stock could rise. Notes: This is basically an educated guess on how high a stock could go in the near future. See also: Bull, Downside rating potential exists if free cash flow is applied to debt reduction and credit measures improve from pro forma levels. Also, the AT&T ownership position, and, to a lesser extent, the Dobson ownership position, is a positive rating consideration. ---CreditWire |
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