Fitch may up Rural Cellular

Fitch Ratings said it placed Rural Cellular Corp. on Rating Watch positive after the announcement that Verizon Wireless would acquire the company for about $2.7 billion in cash and assumed debt.

Rural Cellular has ratings of issuer default CCC, $60 million first-lien credit facility B/RR1, $510 million second-lien secured notes B-/RR2, $325 million senior unsecured notes CCC-/RR5, $600 million senior subordinated notes CC/RR6 and 12.25% junior exchangeable preferred stock C/RR6.

The watch positive reflects Fitch's view that the acquisition will significantly improve the company's financial and business profile, the agency said.

The acquisition of rural properties complements Verizon's network and is expected to add $1 billion of synergies through reduced roaming and operating expenses, Fitch said.

The agency said it also expects Verizon to redeem or refinance the majority of Rural Cellular's high-cost capital structure. After the first quarter, the company repaid the borrowings under its $60 million credit facility. About $1 billion of debt and preferred stock is redeemable in 2007 and more than $900 million of debt will become redeemable in 2008. Verizon is rated issuer default A+.

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