Fitch Rates AmCell's Credit Facility 'BB-'.

CHICAGO -- Fitch assigns a rating of 'BB-' to American Cellular Corporation's (AmCell) senior secured credit facility. In addition, Fitch affirms the 'B-' Issuer Default Rating (IDR) for AmCell, Dobson Cellular Systems Inc. (DCC) and the parent company, Dobson Communications Corp. Fitch downgrades the senior unsecured notes at AmCell to 'B/RR3' from 'B+/RR2'. The senior subordinated notes are affirmed at 'CCC+/RR5'. The Rating Outlook is Stable.

The IDR ratings at Dobson reflect its current leverage, smaller scale as a regional operator, and the competitive operating environment. Fitch also believes a higher level of event risk is present with potential universal service funding (USF) reform since USF disbursements are a material percentage of total cash flow. Positive offsets to these concerns include significantly improved operating metrics at Dobson primarily driven by the nearing completion of its GSM migration (86% of subscribers are GSM) as well as the significant coverage and quality improvements made to the company's GSM network.

The improvement experienced in operating metrics compared to a year ago includes:

--Postpaid churn improved by 87 basis points to 1.95%;

--ARPU increased 5.1% to $49.2;

--Postpaid gross additions increased 9% to 92,100;

--Postpaid net additions increased to 11,300 compared to -34,500.

Performance at AmCell has improved from a year ago but not to the extent of the consolidated results at Dobson. While churn has improved to the same level, gross additions were relatively flat to a year ago and ARPU increased modestly.

The new senior secured credit facility consists of a five-year $50 million senior secured revolving credit facility, a seven-year $100 million senior secured multiple draw term loan, and a seven-year $100 million senior secured delayed draw term loan. If AmCell has not repaid or refinanced its 10% senior notes by Feb. 1, 2011, then the revolving credit facility and term loan facilities will mature on Feb. 1, 2011. AmCell has fully drawn the multiple draw term loan and drawn $25 million on the revolving credit facility. Each term loan facility will amortize in an amount equal to 0.25% per quarter beginning with the fourth quarter of 2006. Financial covenants include a debt to EBITDA limitation of 6.5 times (x) or less. The credit facility is guaranteed by ACC Holdings, LLC, AmCell's direct parent and by each of AmCell's direct domestic subsidiaries except for Alton CellTel Co Partnership. Dobson or DCC does not provide any guarantees for AmCell debt. The credit facility is secured by a first priority security interest in substantially all of the tangible and intangible assets of American Cellular and its direct subsidiaries as well as a pledge of AmCell's capital stock. Borrowings under the credit facility have been used for the Highland acquisition and spectrum auction purchases. As a result of the drawdowns on the credit facilities, leverage increased slightly at Dobson to 6.5x at the end of the third quarter 2006.

Dobson's consolidated liquidity is stable, albeit modest, based on its cash position and lack of near-term maturities. Pro forma cash at the end of the third quarter of 2006 was approximately $102 million reflecting the Highland acquisition and debt redemption. Dobson's nearest material maturity is not until 2011. The indentures with Amcell's 10% senior notes will not allow restricted payments to Dobson until AmCell materially improves its cash flow. Therefore, DCS bondholders must rely on DCS cash generation to service interest payments. For 2006, Fitch expects free cash flow at DCEL to be approximately $40-50 million.

The secured credit facility at AmCell was notched up three times to reflect expectations for outstanding recovery prospects. The ratings for AmCell's senior unsecured notes of 'B/RR3' were downgraded by one notch to reflect the diminished recovery prospects.

Fitch has taken the following rating actions:

Dobson Communications Corp.

--Issuer default rating (IDR) affirmed at 'B-';

--$150 million senior floating rate notes affirmed at 'CCC+/RR5';

--$160 million senior convertible debentures affirmed at 'CCC+/RR5';

--$420 million senior notes affirmed at 'CCC+/RR5';

--$136 million convertible preferred stock affirmed at 'CCC-/RR6'.

Dobson Cellular Systems Inc. (DCS)

--Issuer default rating (IDR) affirmed at 'B-';

--$75 million senior secured credit facility affirmed at 'BB-/RR1';

--$500 million first priority secured notes affirmed at 'BB-/RR1';

--$325 million second priority secured notes affirmed at 'BB-/RR1'.

American Cellular Corporation (AmCell)

--Issuer default rating (IDR) affirmed at 'B-';

--$250 million senior secured credit facility affirmed at 'BB-/RR1';

--$900 million senior unsecured notes downgraded to 'B/RR3' from 'B+/RR2';

--$14.5 million senior subordinated notes affirmed at 'CCC+/RR5'.

Fitch's Recovery Ratings (RR), introduced in 2005, are a relative indicator of creditor recovery on a given obligation in the event of a default. A broad overview of Fitch's RR methodology as it relates to specific sectors, including a Case Study webcast, can be found at www.fitchratings.com/recovery.

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