Citizens Utilities Co. is continuing its aggressive expansion into the telecommunications business with an agreement to buy $292 million of telephone and cable television assets from Alltel Corp. However, the deal places the company's credit rating under increasing pressure.
Citizens will buy 109,000 telephone access lines in eight states, and acquire operations serving 7,000 cable television customers in four states. Alltel is a telecommunications and information services company based in Little Rock, AK. Citizens will pay $250 million in cash, assume $32 million in Alltel debt, and transfer 3,600 Citizens telephone access lines (valued at $10 million) to Alltel. Citizens currently provides telecommunications service in six of the eight states.
The announcement prompted Moody's Investors Service to place Citizens' $425 million in long-term debt (senior debt Aa3) under review for possible downgrade. Moody's is concerned about the amount and timing of the additional debt burden. In 1993, Citizens made a $1.1-billion acquisition of GTE telephone properties. Although the GTE purchase is 98 percent complete, Moody's says the "resulting high levels of debt continue to weaken the balance sheet." (em LG
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