S&P: Dobson on negative watch

Standard & Poor's said it placed its ratings for Dobson Communications Corp., American Cellular Corp., and related entities on CreditWatch with negative implications.

Dobson's corporate credit rating is B- and senior unsecured debt rating is CCC+; American Cellular's corporate credit and senior unsecured debt is rated B-.

S&P said the CreditWatch placement reflects the potential violation of bank covenants before year-end 2004 resulting from the company's revised EBITDA guidance, as well as increased pressure on roaming revenue due to the pending merger between AT&T Wireless Services Inc. and Cingular Wireless LLC.

In the fourth quarter of 2003, Dobson Communications' roaming revenue, which comprises a high approximate 25% of total revenue, was lower than anticipated due to the slower growth in roaming minutes of use, particularly from its largest roaming partner, AT&T Wireless Services.

AT&T Wireless has been moving more of its traffic onto its cost-efficient global system for mobile communications network and also has been roaming on Cingular's network as its preferred roaming partner. In addition, AT&T Wireless was not including free roaming into Dobson's markets in its global system for mobile rate plans.

S&P said that because of anticipated lower roaming revenue, Dobson reduced EBITDA guidance for 2004 to the $390 million-$425 million range. This could result in a breach of the consolidated debt leverage covenant of 6.0x under the secured bank facility before year-end 2004.

Based on the lower range of the EBITDA guidance for 2004, net debt to EBITDA would still be tight at about 5.7x, the agency said.

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