Arch Communications Group Inc. amended two credit agreements for various subsidiaries, in part to help finance future purchases of narrowband personal communications services spectrum.
In separate news, Moody’s Investor Services Inc. lowered its ratings on some of Arch’s debt.
Arch’s credit facility for subsidiary USA Mobile Communications Inc. increased from $60 million to $110 million. The new amount will be available through June 30, 2000, and the final maturity date for the agreement was extended from Dec. 31, 2000, to June 30, 2002, said Arch. The Westborough, Mass., company drew $53 million from the account Dec. 31.
Arch Chairman Ed Baker said the company plans to acquire narrowband PCS spectrum either through auction or through the purchase of existing licenses from companies “that may choose to sell rather than build out.” The Federal Communications Commission has not set an auction date for narrowband PCS spectrum, but some expect it could happen by the end of this year.
Arch modified another credit agreement for other operating subsidiaries to extend the useful life of the facility and to aid in buying more NPCS spectrum. That facility totals $500 million, of which $328 million was drawn Dec. 31. The account includes a reducing revolver of $250 million and two term loans of $100 million and $150 million. The full amount of the term loans and $78 million of the revolver were drawn Dec. 31. The revolver will be available through Dec. 31, 1999, and the final maturity date is Dec. 31, 2002.
Moody’s said it lowered its outlook on Arch due to the “company’s growing leverage, deteriorating cash flow coverage of interest expense, and the shorter-term risks associated with the company’s strategy to consolidate its multiple brand-names.” The paging carrier’s ratings are supported, however, by strong management people-“widely believed to be some of the best in the industry”-and Arch’s number three position in the industry, noted Moody’s.
Moody’s rating remains stable for Arch’s USA Mobile B2 rated $125 million 9.5 percent senior notes due 2004 and $100 million 14 percent senior notes due 2004, and B1 rated $110 million senior bank facility.
However, the New York-based investor service said it changed its rating on Arch’s B3 rated $467.38 million senior discount notes due 2008 and Arch Communications Enterprises B1 rated $500 million senior secured bank facility to negative from stable.
Moody’s said Arch’s cash flow coverage of interest expense, which excludes cash flow from USA Mobile, has run downward from 1.37 times for the first quarter 1996 to 1.07 times for fourth quarter. Moody’s noted Arch’s $467.38 million senior notes “are discount notes that go cash pay only starting Sept. 15, 2001.” So while deteriorating, the cash flow coverage of cash interest “is higher than the above numbers would indicate.”
Arch’s consolidated leverage was among the highest in the industry, at $279 of debt per pager at year-end 1996, driven by Arch’s $318 million cash acquisition of Westlink Paging Inc., reported Moody’s.
