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27 Apr 2011
New $180 million secured credit facility rated B2
New York, April 27, 2011 -- Moody's Investors Service has assigned a B3 corporate family rating
(CFR) to first time issuer MTPCS LLC, Oklahoma 5 LLC, Texas
10, LLC, and Central Louisiana Cellular, LLC (collectively
referred to here as "CellularOne," or the "Company")
and a B2 rating to the company's new $180 million senior
secured credit facility. Proceeds of the new debt will be used
to retire existing debt and fund a $30 million distribution to
the company's equity sponsors. The outlook is stable.
The following ratings were assigned:
.Issuer: Cellular One, LLC
..Corporate Family Rating: B3
..Probability of Default Rating: Caa1
..$180 million Senior Secured Credit Facility:
B2, LGD2-28%
..Speculative Grade Liquidity: SGL 2
..Outlook: Stable
Cellular One's corporate family rating reflects the company's
high leverage, small scale and the highly competitive environment
in which it operates as well as the capital intensity of the industry.
The rating is supported by Cellular One's base of recurring revenues,
its spectrum holdings, strong margins and positive free cash flow.
The company's position in smaller markets allows it to focus on
customer service and differentiate itself from its much larger national
peers and to benefit from universal service transfer payments as an eligible
telecommunications carrier (ETC). Cellular One's network
coverage in these smaller markets also allows the company to capture roaming
revenues from larger carriers whose network footprint is less dense than
Cellular One's.
However, despite the small market focus, Cellular One is weakly
positioned versus larger national peers with respect to network capabilities,
handset availability, cost structure, brand awareness and
sales and marketing capabilities. Cellular One lags the industry
from a technology perspective, operating a second-generation
(2G) network with limited data capabilities. Cellular One's
plan to upgrade to 3G by year-end 2013 is less aggressive than
most major carriers' 4G roadmaps. Moody's views Cellular
One's weak competitive position as a key determinant of its B3 rating.
Moody's anticipates that Cellular One's revenues and EBITDA
will be flat to down slightly over the next 2-3 years due to competitive
pressure and modest subscriber losses. We project that leverage
will remain approximately 4.25x (Moody's adjusted) as debt
falls modestly due to the excess cash sweep conditions in the term loan
credit agreement. Cash from operations is projected to be strong,
but capital investment required to upgrade the network to 3G will result
in only modest positive free cash flow.
The senior secured credit facility is comprised of a $175 million
term loan and $5 million revolver issued by Cellular One's
subsidiaries MTPCS LLC, Oklahoma 5 LLC, Texas 10 LLC and Central
Louisiana Cellular LLC as co-borrowers. The credit facility
is secured by first priority lien on all assets of the company and its
subsidiaries. The facility is subject to financial maintenance
covenants for leverage, interest coverage and maximum capital expenditures.
The ratings for the debt instruments were determined using Moody's
Loss Given Default Methodology, which considers the non-debt
liabilities which are subordinate to the senior secured credit facility.
These subordinate liabilities provide some loss absorption to the B2 rated
senior secured facility and result in a one-notch uplift from the
B3 CFR.
Moody's views Cellular One's liquidity as good, and
projects the company will exit 2011 with over $10 million in cash
and a fully available $5 million revolver.
The ratings could face upward pressure if the company is able to improve
operating and financial trends and return to organic subscriber growth.
Upwards rating momentum could build if Debt to EBITDA were to trend towards
4.0 times on a sustainable basis while free cash flow as a percentage
of debt grew to the mid-single digits.
Moody's would likely lower the company's rating if subscriber losses accelerate,
churn increases or pronounced EBITDA margin erosion develops due to competitors
encroaching on the company's customer base. In addition,
if the company's credit metrics and/or cash position were to dramatically
deteriorate (i.e. Debt to EBITDA trending towards 6.0
times) due to aggressive spectrum or asset acquisitions, its ratings
could be negatively impacted.
The principal methodology used in rating Cellular One was Moody's Global
Telecommunications Industry, published in December 2010 and available
on www.moodys.com. Other methodologies and factors
that may have been considered in the process of rating this issuer can
also be found in the Rating Methodologies sub-directory on Moody's
website.
This is the first rating action Moody's has taken on Cellular One.
With headquarters in Wayne, PA, Cellular One, LLC is
a holding company with wholly owned subsidiaries which provide wireless
services to approximately 150,000 subscribers in Montana,
Texas, Oklahoma and Louisiana. Cellular One had approximately
$134 million in revenue for the LTM period ended March 31,
2010.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, and confidential and proprietary Moody's
Investors Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
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validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
New York
Dennis Saputo
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
John Diaz
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's assigns B3 rating to Cellular One
No Related Data.
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