Centennial Communications to launch $750 million credit facility Tuesday

By Sara Rosenberg

New York, Jan. 15 - Centennial Communications Corp. is scheduled to hold a bank meeting on Tuesday for a proposed $750 million senior secured credit facility, according to a syndicate document. Credit Suisse First Boston is the joint lead arranger, joint bookrunner and administrative agent. Lehman Brothers is the joint lead arranger, joint bookrunner and syndication agent on the deal.

The facility consists of a $150 million six-year revolver with an interest rate of Libor plus 325 basis points and a commitment fee of 50 basis points, and a $600 million seven-year term loan B with an interest rate Libor plus 325 basis points, according to the document.

Term loan borrowings, together with proceeds from a $250 million proposed senior notes offering, will be used to refinance and replace the existing secured credit facilities, which had an outstanding principal balance of about $628 million as of Nov. 30, fund the repurchase of all outstanding unsecured subordinated notes due 2009, which are currently accruing paid-in-kind interest at a rate of 13% and had an outstanding balance of about $194 million at Nov. 30, and pay related fees and expenses, according to a company news release.

Closing on the bank and bond transactions is expected to take place in early February.

On Thursday, Moody's Investors Service assigned a B2 rating to the credit facility with a stable outlook.

"While Centennial does generate meaningful amounts of free cash flow, such amounts are expected to be modest relative to the company's debt burden," Moody's said. "This debt burden is increasing with the pending transaction whereby Centennial is refinancing structurally subordinated PIK debt held by a strategic shareholder for structurally senior cash-pay public notes.

"This increase in debt is partially mitigated by the bank loan amortization relief Centennial will receive under the terms of a new $750 million credit facility.

"In assigning a B2 to this new senior secured credit facility, Moody's notes the reduced size of this facility compared to the existing credit agreement. With only $600 million of term loans fully drawn, and minimal if any drawings under the $150 million revolving facility, Moody's believes these lenders are well protected by their collateral and guarantee package from all the company's operating subsidiaries."

Centennial Communications is a Wall, N.J., wireless telecommunications service provider.

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