Fitch rates Rural Cellular notes CC

Fitch Ratings said it assigned a CC/RR6 rating to Rural Cellular Corp.'s $425 million senior subordinated floating-rate notes offering due 2013, which will bear interest at Libor plus 300 basis points.

The outlook is stable.

The proceeds from the offering, together with cash on hand, will be used to redeem the $115.5 million 11 3/8% senior subordinated debentures due 2010 and the $300 million 9¾% senior subordinated notes due 2010.

The agency said Rural Cellular's CCC issuer default rating incorporates its very high leverage, limited financial flexibility, the competitive operating environment and its reliance on non-retail revenue sources. Fitch also believes event risk is present from potential Universal Service Fund reform and future roaming rate pressure from the 700 MHz spectrum auction.

Positively, Rural Cellular has taken actions to address its past operational challenges and to improve its burdensome capital structure, the agency added.

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