NEW YORK-Moody’s Investors Service confirmed its speculative-grade ratings on $2 billion of debt owed by Dobson Communications Corp., Oklahoma City, but also changed its rating outlook to negative from stable.
“The ratings confirmation is based upon the good liquidity of Dobson Communications and its 100 percent owned subsidiaries, stable operating metrics and relatively modest near-term debt amortization requirements,” said Andris Kalnins and Marcus Jones, corporate credit analysts for Moody’s.
“The negative ratings outlook reflects Moody’s opinion that, notwithstanding stable operating trends such as ARPU and churn, along with decent subscriber growth, quarterly improvements have begun to decelerate, making the future cash flow growth (that is) necessary to service the company’s indebtedness more doubtful.”
Kalnins and Jones also cited what they called, “another, more threatening overhang on the credit,” namely a Dobson family loan, which comes due March 31, and is secured by securities representing a controlling interest in the cellular operator. The current market value of the securities pledged as collateral is well below the amount of the Dobson family loan, the analysts said.
“This loan has been amended and extended at least once already, and the lender’s patience may be tested,” they said.
“If the lender elects to seize his collateral, it could trigger a change of control under the DCC senior notes and two public preferred stock issues, the DOC (Dobson Operating Co.) and Sygnet credit facilities and the Dobson/Sygnet senior notes.”
