Moody's affirms Citizens Communications ratings

Moody's Investors Service said it has affirmed the ratings of Citizens Communications Co. while the outlook on all ratings remains negative, following the company's announcing that it is pursuing several possible strategic alternatives and its intention to hire a financial consultant to assist in the process.

Ratings affirmed include the company's Baa2 senior unsecured rating and Ba1 preferred shelf rating as well at its Baa3 subordinated shelf rating.

Moody's said it believes that the implementation of the following strategic initiatives would negatively impact Citizens' rating: 1) Citizens is purchased via a leveraged buyout; 2) Citizens weakens its balance sheet in a merger with another telecommunications operator; 3) Citizens uses a significant amount of cash to repurchase shares; or 4) Citizens announces an aggressive dividend payout policy.

Citizens' Baa2 senior unsecured ratings are constrained by high leverage and only modest interest coverage. The company's access line acquisitions during 1999 and 2000 weakened its balance sheet considerably.

Since then, the company has made substantial progress by selling non-core utility assets, improving operating margins at its core ILEC properties, and reducing net debt levels.

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