NEW YORK-US Unwired Inc., a Sprint PCS affiliate headquartered in Lake Charles, La., plans to tap the public debt markets for $200 million in 10-year notes, Moody’s Investors Service Inc. said Oct. 12.
The New York-based rating agency assigned a speculative grade rating of Caa1 on the planned issue of senior subordinated discount notes. It accorded a slightly higher rating of B1 to a $130 million secured bank credit facility US Unwired has obtained.
US Unwired owns or has agreements to use personal communications services spectrum covering 9.9 million people in a area from east Texas to the Florida panhandle and north to portions of Oklahoma and Tennessee.
Unlike AirGate PCS, the first Sprint affiliate to gain public debt financing, US Unwired owns its own PCS spectrum in about one-third of its service territory, Moody’s said.
US Unwired has launched PCS service in about a quarter of its markets and had about 31,000 PCS subscribers as of June 30. By mid-year, the company’s existing cellular operation had about 63,000 customers.
Besides its affiliation agreement with Sprint PCS, US Unwired also is bolstered by a $50 million private equity investment from Brown Brothers Harriman.
“US Unwired will benefit from significant amounts of roaming traffic from Sprint PCS subscribers from the nearby markets of Dallas, Houston and New Orleans,” said Michael Rowan and Marcus Jones of Moody’s corporate finance group.
Although the analysts said they expected US Unwired to be cash flow negative for at least 2.5 years, its other strengths “support a stable ratings outlook.”
The planned MCI WorldCom Inc. acquisition of Sprint Corp. will have a neutral effect on Moody’s rating outlook on US Unwired debt for two reasons, they added. The combined company still will need to fill out its national footprint, and “any acquirer of Sprint is obligated to perform Sprint PCS’ contractual obligations with regard to its affiliates,” Rowan and Jones said.
