Moody's affirms Eschelon Operating

Moody's Investors Service said it affirmed its Caa1 rating for Eschelon Operating Co.'s $165 million of senior secured notes due 2010. The outlook is stable.

The add-on notes will be priced at a discount with expected proceeds of around $52 million, which will be used along with proceeds from the issuance of $15 million of series B preferred stock to fund the $46 million acquisition of the stock of Advanced Telecom Inc., with the rest of the net proceeds being placed on the balance sheet to boost cash balances.

Moody's also affirmed Eschelon's Caa1 senior implied rating and Caa2 issuer rating and upped the liquidity rating to SGL-2 from SGL-3.

Moody's said the ratings reflect high leverage and low interest coverage pro forma the acquisition of Advanced Telecom.

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