Moody's rates Rural Cellular notes

Moody's Investors Service said it assigned a B2 rating to the pending issue of senior secured floating-rate notes due 2010 and senior secured notes due 2012 whose aggregate proceeds will be $510 million.

Moody's also confirmed the existing ratings for the company, with a stable outlook.

Ratings affected include the company's senior implied rating confirmed at B3, issuer rating confirmed at Caa1, $60 million senior secured revolver due 2010 assigned B1, $510 million of senior secured second lien notes due 2010/2012 assigned B2, $325 million 9.875% senior notes due 2010 confirmed at Caa1, $125 million 9.625% senior subordinated notes due 2008 confirmed at Caa2, $300 million 9.75% senior subordinated notes due 2010 confirmed at Caa2, $273 million 11.375% senior exchangeable preferred stock due 2010 confirmed at Ca, and $148 million 12.25% junior exchangeable preferred stock due 2012 confirmed at C.

Moody's said the B3 senior implied rating for Rural Cellular reflects the company's continuing high leverage, very slow subscriber growth, and management's limited ability to meaningfully reduce leverage through operating cash flow growth.

Moody's noted the proposed financing does improve the company's financial flexibility by eliminating bank loan amortization requirements that are currently scheduled to resume in 2005.

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