Few companies in the sector were as uncharastically quiet as ccoi in 2010, but perhaps that is about to change. The alternative network operator announced this morning that it is accessing the credit markets to the tune of $150M in senior secured notes due 2018. The question is, what will they use it for? They have no immediate needs, and the PR simply states:
“general corporate purposes and/or repurchases of Cogent’s common stock or its convertible notes or a special dividend to Cogent’s stockholders”
The astute reader will notice what they did not mention in any form: M&A. You’d think they’d at least mention the possibility, and the omission suggests they really aren’t looking to buy anything – just like last year.
But whatever they do with it will be opportunistic, because Cogent doesn’t have to do anything at all here. The converts they might repurchase total just $92 in face value, have a 1% coupon, aren’t due until 2027, and convert at a stratospheric stock price of $49. Meanwhile, their cash flows aren’t too red and they are actually edging close to the break-even point on earnings.
Buybacks are too slow, it sounds to me like a special dividend a la AboveNet is in the works.
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Rob,
A small point– the owners of the convert have a put of the notes back to CCOI in a couple of years so the 2027 maturity is moot. As to use of proceeds, I would prefer stock buybacks.
Can’t see Schaeffer ever wanting to give money to the shareholders.