NEW YORK-PriCellular Wireless Corp. plans to issue $140 million in senior unsecured debt, mostly to finance its acquisition of four clustered rural cellular properties in Kentucky from Horizon Cellular Group.
PriCellular, based in New York, agreed to pay $116.5 million in cash and stock to Horizon, headquartered in Malvern, Penn. The cash portion of the purchase totals $94 million. Proceeds of the planned sale of notes, due 2004, also will be used for general corporate purposes, including refinancing $19.4 million in outstanding senior debt.
Moody’s Investors Service Inc., New York, assigned a speculative grade B1 rating to the proposed debt securities.
“The B1 senior rating … reflects the challenges that PriCellular will face in expanding its market penetration and enhancing its cash flow in an environment of increasing competition,” said the Moody’s report, written by James Parrish, managing director, and Eric Goldstein, senior analyst, both in the Speculative Grade Ratings group. “PriCellular also faces the shorter-term challenge of integrating into its operations [the] Kentucky cluster acquisition, which has lower penetration and higher market costs per subscriber than its existing properties. The company’s track record in this regard, however, is good.”
On the positive side, among other factors, Moody’s noted is PriCellular’s rural footprint, which is less subject to immediate competition from personal communications services. PriCellular’s relationship with AT&T Wireless Services Inc., which owns 19.4 percent of it, also gives it the advantage of large-volume equipment purchase discounts, joint marketing opportunities and technical advice.
“The risk exists, however, that PriCellular-whose properties adjoin AT&T’s in eight Midwestern and Mid-Atlantic states-could feel pressure to sacrifice [its] Cellular One brand name in favor of an AT&T brand should AT&T choose to market solely under its own brand,” Moody’s said. “In that event, PriCellular would be leaving open a high-recognition brand name for competitors to use against [it] in its markets.”
