NEW YORK-American Cellular Corp. and its subsidiary, American Wireless, received a low, speculative grade rating of Caa1 from Moody’s Investors Service on $1.285 billion in debt financing they plan to buy PriCellular Corp.
The $1.4 billion acquisition, expected to close in June, will be paid for out of a proposed $1 billion credit facility of American Wireless; $285 million in 10-year notes issued by American Cellular, of which $85 million must be escrowed for interest payments; and $350 million in equity.
American Cellular was formed by several investors in order to buy PriCellular. They will replace the carrier’s current management with a “team who has experience in rural cellular and paging,” Moody’s said.
PriCellular, based in White Plains, N.Y., had about 260,000 subscribers in its service areas near Minneapolis, Lexington, Ky., Albany, N.Y., Pittsburgh, Penn., and Knoxville, Tenn.
Its markets cover a population of about 5.1 million, including “300,000 subscribers in (its) Southwestern Bell venture, which we expect to be sold by 1999,” said Tom Marshella, managing director, and Douglas Bontemps, senior analyst, for Moody’s corporate finance group.
They cautioned that American Wireless, which has a below-average market penetration of 5.1 percent, faces competition from established cellular carriers like US Cellular Corp. and AirTouch Communications Inc. Furthermore, personal communications services providers likely will take advantage of “wireless phones which incorporate multiple technologies and frequencies” to market their services in smaller cities, the Moody’s analysts said.
