Moody's downgrades GCI

Moody's Investors Service said it downgraded GCI Inc.'s corporate family and probability-of-default ratings to B1 from Ba3 and its senior unsecured rating to B3 (LGD5, 84%) from B1 (LGD5, 80%).

The outlook is stable.

The downgrades reflect the sizable execution risks associated with GCI's aggressive capital expansion plans, the agency said, which could consume significant amounts of cash through the next year and increase leverage to more than 5 times by the end of 2008.

Moody's noted that potential tightness of financial maintenance covenants may somewhat limit the company's financial flexibility, notwithstanding excess cash balances following completion of the term loan placement.

The new rating recognizes the expected benefits that GCI's investments may have on its already favorable competitive position as well as the relative strength of the Alaskan economy compared with the broader U.S. economy, the agency said.

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