Moody's rates Cellnet loans B2, B3

Moody's Investors Service said it assigned Cellnet Technology Inc. a B2 rating for its new $30 million senior secured revolving credit facility due 2010 and $200 million senior secured term loan B due 2012 and a B3 rating for its new $150 million senior secured second-lien term loan due 2013.

The senior implied rating is B2, and the senior unsecured issuer rating is Caa1.

Proceeds from the financing transaction will be used to refinance existing debt of $153.5 million, redeem preferred stock of $59.7 million (held by the equity sponsor and management), pay a dividend of $64.4 million, fund capital spending of $38 million and provide $25 million of cash for general corporate purposes.

Moody's said the ratings reflect Cellnet's significant debt level, highly aggressive financial policy, and considerable volatility in its cash flow generation caused by large capital spending to fund some of its customers' network deployment costs.

On the other hand, Moody's said, the ratings are supported by the company's leading market position in the fixed AMR market with significant barriers to entry and high customer switching costs. The ratings also consider Cellnet's substantial level of recurring service revenue stream, as well as favorable industry trends and growing demand for the AMR technology.

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