S&P rates IWO Escrow floaters CCC+, discount notes CCC-

Standard & Poor's said it assigned its CCC+ corporate credit rating to IWO Escrow Co. The outlook is positive. The company is a newly formed entity that will be merged into IWO Holdings Inc., an affiliate of Sprint PCS, after IWO Holdings completes a prepackaged Chapter 11 bankruptcy reorganization.

S&P assigned a CCC+ rating and a recovery rating of 3 to IWO Escrow's proposed $150 million senior secured floating-rate notes due 2012 and a CCC- rating to the company's proposed $75 million senior discount notes due 2015.

Issue proceeds will be used to repay the existing $215 million in secured bank debt of IWO Holdings' subsidiary, Independent Wireless One Corp. The remaining funds will pay restructuring fees and expenses, disputed charges to Sprint Corp., and financing expenses.

S&P said the ratings on IWO reflect high financial risk from capital expenditure-related debt and negative free cash flow incurred during an extended business start-up period. Market penetration and average revenue per user are below average compared with peers' because of intense competition, weak marketing and distribution efforts, elevated customer churn, and relatively low penetration of data services. These factors have hampered revenue and EBITDA growth.

Tempering factors, S&P added, include brand recognition and operating support from the Sprint PCS relationship, and roaming revenue from Sprint PCS customers in larger adjacent markets.

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