S&P rates Eschelon notes CCC+

Standard & Poor's said it assigned its CCC+ rating to the $100 million 8 3/8% senior second secured notes due 2010 issued by Eschelon Operating Co., a wholly owned subsidiary of Minneapolis-based competitive local exchange carrier Eschelon Telecom Inc.

Proceeds from these notes have been used to refinance bank debt.

Simultaneously, S&P affirmed Eschelon's CCC+ corporate credit rating. The outlook is developing.

S&P said the corporate credit rating on Eschelon primarily reflects the company's lack of sustainable competitive advantages in the intensely competitive telecommunications services industry.

Still, given that the company has a low cost structure and that its business model allows it to adjust capital spending based on business prospects, Eschelon is expected to have modest free cash flow prospects.

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