American Cellular negotiating credit facility amendment

By Peter Heap

New York, May 15 - American Cellular is in discussions with its bank lenders about amending its credit facility because it will likely not comply with the leverage covenant during 2002.

There is also doubt about the company's ability to continue as a going concern and it made the most recent interest payment on its bank debt two days late.

The leverage covenant limits American Cellular's total debt leverage ratio to 9.25:1 in the first quarter of 2002, dropping to 7.75:1 in the fourth quarter, according to a filing with the Securities and Exchange Commission by its 50% owner Dobson Communications Corp.

"Absent debt reduction from projected debt levels or an amendment to the credit facility modifying this covenant, American Cellular may be unable to comply with this covenant during 2002," the filing added.

It noted that if American Cellular is unable to comply with or amend the covenant its lenders would have the right to accelerate all amounts owing, which would also trigger a similar acceleration on the company's senior subordinated notes.

If this happened, American Cellular would attempt to renegotiate the debt with the holders to extend the payment term, the filing said.

Because the company cannot provide an assurance it will be able to do this, there may be substantial doubt about American Cellular's ability to continue as a going concern, the SEC filing said.

The filing also noted that American Cellular also had a going-concern warning from its independent auditors for 2001.

In addition, a debt compliance certificate from the auditors was not delivered to the administrative agent for American Cellular's credit facility until three days after the certificate was due and the interest payment due to the banks on April 8 was actually paid on April 10.

Because these events might be a material adverse change, American Cellular received a waiver through May 17, 2002 from the administrative agent on the facility.

American Cellular's credit facility is currently for $1.34 billion and Bank of America is the administrative agent.

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