Telecom Ramblings

International IP services provider Global Crossing (GLBC: chart, news) is hoping to tap the credit markets to the tune of $650M of senior secured notes due 2015.  That’s a pretty hefty pile of cash of course, but most of it is aimed at refinancing existing debt.  We knew they were going to make some kind of move in the credit markets since they have already tendered for the $225M of GC Impsat notes and consents.  Apparently lots of those notes are being tendered although the deadline isn’t until Sept 21.  

But now Global Crossing hopes to raise funds to also refinance their $342M Senior Secured Term Loan.  If they raise the full amount and repay both in full, they would have some $83M left over for those ubiquitous “general corporate purposes”.  Nothing to sneeze at of course, but probably just enough to pad the coffers a bit.  But the GC Impsat notes probably won’t all be tendered so they may have more left over than that

Now, the term loan comes due in 2012 and it is of course prudent in economic times like these to refinance such debt early if one can.  But it’s interesting that they began this process addressing the GC Impsat notes which aren’t due until 2017 and have an interest rate of 9.875%.  That isn’t something they’re likely to be able to beat by much right now are they?.  So why refinance them to an earlier 2015 maturity?  It must therefore be the waiving of the covenants in the indenture that they are really after.   I wonder which of those are currently limiting something they would like to do.  It’s tough reading the legalese, but perhaps the key ones are those limiting debt to EBITDA to a 4:1 ratio – which certainly might limit their ability to participate as a buyer in industry consolidation down the line.