NEW YORK-Moody’s Investors Service Inc. announced Oct. 10 it has upgraded its ratings on $350 million in outstanding debt issued by Centennial Cellular, New Canaan, Conn.
The New York-based rating agency raised its speculative grade rating to B1 from B2 on two senior note issues: $250 million at 8.88 percent due 2001 and $100 million at 10.13 percent due 2005.
“The upgrade reflects (in part) improvements in Centennial’s operating cash flow over the past two years; impressive historical growth in the United States for wireless voice services and the expectation of continued strong growth as rates [i.e. prices] decline further,” said the ratings report, written by Robert N. McCreary, senior credit officer, and Robert G. Konefal, senior analyst, both in Moody’s Speculative Grade Group.
However, Moody’s also cautioned that Centennial’s “credit improvement has been tempered somewhat by its large investment” to buy one of the personal communications services licenses for Puerto Rico and to build its system there. The rating agency said that cash flow in fiscal year 1997 is likely to be negative for Centennial’s PCS operation in Puerto Rico, which is scheduled to be commercially launched in November.
Although Moody’s said it anticipates cash flow to turn positive during fiscal year 1998, it also said that Centennial’s PCS system in Puerto Rico will be challenged by competition from existing cellular operators, Cellular Communication of Puerto Rico and Puerto Rico Telephone, as well as other PCS licensees, including AT&T Corp.
Centennial has used most of the funds it already has raised to help finance “numerous acquisitions made over the past two years to augment its cellular footprints in the Michigan/Indiana and Louisiana/east Texas areas, as well as to fund the Puerto Rico (PCS) effort,” Moody’s said. “The company likely will require additional capital soon to fund the Puerto Rico operating losses and further capital expenditures in Puerto Rico and the United States.”
