Arch Communications on S&PWatch Re:MobileMedia Acquis.NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 8/20/98--Standard & Poor's placed its ratings of Arch Communications Group Inc. and related entities on CreditWatch with positive implications (see list below). 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 for the acquisition, Arch's total debt is about $1.35 billion. This action follows the company's announcement that it is negotiating a definitive merger agreement to acquire MobileMedia Corp., which is in Chapter 11 reorganization The process of carrying out, through agreements and legal proceedings, a business plan for winding up the affairs of, or foreclosing a mortgage upon, the property of a corporation that has become insolvent. . The CreditWatch placement reflects the potential improvement in Arch's financial and business risk profile as a result of this acquisition. This acquisition would result in Arch being the second-largest paging company in the U.S. with seven million subscribers. The acquisition price for MobileMedia is estimated to be $479 million plus the payment of MobileMedia's administrative expenses and debtor-in-possession borrowings. Additionally, the single-'D' rating on MobileMedia Communication Inc.'s $480 million subordinated debt Subordinated Debt A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known as "junior security" or "subordinated loan". , which will be exchanged for equity in the merged company, will be withdrawn. MobileMedia Communications is a subsidiary of MobileMedia Corp. Upon the receipt of the necessary shareholder and regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. approvals, the CreditWatch listing will be resolved. Arch intends to finance the acquisition with a combination of debt and equity. About $262 million of the purchase price will be financed with bank debt and a public note offering. The remaining $217 million will be financed through the proceeds of a rights offering by Arch to MobileMedia's unsecured creditors Unsecured Creditor An individual or institution that lends money without obtaining specified assets as collateral. This poses a higher risk to the creditor because they have nothing to fall back on should the borrower default on the loan. A debenture holder is an unsecured creditor. . Upon the exercise of these rights and the purchase of warrants to own additional common stock, MobileMedia's unsecured creditors could ultimately own about two-thirds of Arch. On the other hand, MobileMedia's secured creditors One who holds some special monetary assurance of payment of a debt owed to him or her, such as a mortgage, collateral, or lien. , who claim $649 million in principal amount, would receive 100% of such principal amount comprised of the $479 million payment from Arch and $170 million in proceeds from MobileMedia's pending sale of its tower assets. The CreditWatch placement reflects the potential improvement in Arch's financial and business risk profile as a result of this acquisition. The additional annual cash flow of about $100 million from MobileMedia's operations is anticipated to reduce debt to 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. to below 6 times (x) on a pro forma basis, compared to the current high level in the 7x area. In addition, annual cost savings of about $25 million resulting from this transaction and $15 million from Arch's recent restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). , plus MobileMedia's higher revenue generating paging units should further improve Arch's financial profile. Arch's business risk profile will be enhanced due to MobileMedia's presence in 50 states with more than four million subscribers and extensive distribution channels. In addition, MobileMedia serves a larger number of corporate accounts compared to Arch, resulting in an overall higher average revenue per unit. MobileMedia's two narrowband In communications, transmission rates up to T1 speeds (1.544 Mbps). The upper limit is moving target. At one time, narrowband meant 150 bps (that is 150 bits per second!). Then, the upper limit became 2,400 bps. Later, it moved to 64 Kbps. Contrast with wideband and broadband. personal communications services See PCS. licenses also provide the opportunity to introduce new revenue enhancing paging products and services, Standard & Poor's said. --CreditWire -0-
RATINGS PLACED ON CREDITWATCH WITH POSITIVE IMPLICATIONS
Rating
Arch Communications Group Inc.
Corporate credit rating B-
Senior unsecured debt CCC
Arch Communications Inc.
Corporate credit rating B-
Senior unsecured debt CCC+
Arch Paging Inc.
Corporate credit rating B-
Bank loan rating B-
USA Mobile Communications Inc. II
Corporate credit rating B-
Senior unsecured notes CCC+
CONTACT: Rosemarie Kalinowski, New York (1) 212-208-1645
For more information on criteria or subscriptions:
http://www.ratings.standardpoor.com
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