NEW YORK-Fitch Ratings placed U.S. Cellular Corp. and its parent company Telephone and Data Systems Inc. on Rating Watch Negative following TDS’ announcement that it plans to restate financial results for fiscal years 2000 through 2004 and the first two quarters of 2005. Fitch noted the ratings change impacts approximately $1.9 billion of TDS and U.S. Cellular debt.
Fitch also pointed out that due to the restatements and late filing of TDS and U.S. Cellular’s 10-Q report, TDS will need to obtain a waiver of an event of default from its bank group, as well as one counterparty associated with the prepaid forward contracts. As a result of the default, TDS and U.S. Cellular would be unable to borrow under their revolving credit facilities.
TDS has arranged for a $105 million intercompany borrowing agreement with U.S. Cellular that the carrier said will give it sufficient cash until it obtains waivers. U.S. Cellular also had a $1.1 billion consolidated cash balance at the end of the second quarter.
“Fitch expects the Rating Watch to be resolved with the conclusion of TDS obtaining the required waivers from its lenders, as well as TDS successfully filing their 10-Q results,” Fitch wrote in a statement. “In the event further additional material weaknesses are discovered, the company can not obtain waivers from its lenders, or the company can not file the 10-Q in a timely manner, Fitch will conduct a further review to determine whether any additional rating actions are warranted.”
U.S. Cellular’s stock was trading down 19 cents per share early Friday at $50.25. TDS’ stock was trading up 9 cents per share at $37.60.
