Telecoms Pour Through Crack In Credit Market’s Door

September 15th, 2009 by · 2 Comments

There has been a mini news blitz from telecoms accessing the credit markets in the last few days, implying that a real window has opened in the credit markets.  If so, we can expect more activity over the next few days as those who need to take advantage of the opening.  Let’s look quickly at the financial moves made by glbc, q, CenturyLink (NYSE:CTL, news, filings), and Zayo Group (news, filings) to start the week off.

First off, Global Crossing’s $650M private offering morphed into $750M.  The new senior secured notes due 2015 will bear interest at 12% and were priced at 97.944% of par.  They will use it to refinance their term loan facility and to buy back as many of the GC Impsat notes as they collect from their current tender offer by Sept 21.  But even if they get it all, there will still be over $150M in extra cash left over.  That’s not a lot when it comes to M&A, but it’s not chump change either and will give them some flexibility if nothing else.

Qwest offered $300M in notes on Monday morning, and by Monday evening they had placed $550M worth of them.  And they say ILECs move slowly…  The new notes are due in 2015, bear interest at 8%, and were priced at 98.244% of par.  The proceeds will probably be used simply to continue to refinance parts of their balance sheet.

Not to be outdone, CenturyLink sold $650M in two parts.  The first $250M were 6.15% senior notes due 2019, and the next $400M were 7.6% notes due 2039.  The proceeds will be used to help repurchase up to $800M in existing debt with maturities ranging between 2010 and 2013 that they are tendering for concurrently.  This is of course part of the cleanup of the combined balance sheets of CenturyTel and Embarq, as the company molds itself into its new form.

And last but not least, regional and metro fiber provider Zayo Group raised $30M of new debt from CoBank, Royal Bank of Canada, and SunTrust.  The money will be used to fund the acquisition of Fibernet Telecom Group in part.  Actually, Zayo raised $128M in the spring to pursue M&A targets, and spent only $91M or so of it so far.  By my reckoning, that leaves them another $57M with which to find more assets to buy.  No doubt they’ll manage to find something by Christmas.

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Categories: Financials · ILECs, PTTs · Internet Backbones · Metro fiber

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2 Comments So Far

  • Dan Caruso says:

    Let’s see. Raised $128M….spent $91M…leaves another $57M… 128-91 = 37M? Where did $57M come from? not sure how you got to $57M but strangely the answer is close to right. let me explain…

    when we raised $128M, $34M went into Zayo and the remaining $94M was committed. However, Zayo did not need the $34M for its organic business, as we have been FCF positive. Therefore, $34M was used to fund part of fibernet. The $30M debt was also used to fund Fibernet. As such, we called $37M of the $94M Series B round, leaving us with $56M more of Series B, if we need it. Also, our cash balance post Fibernet is over $15M and we expect to stay FCF positive–hence building up our cash balance.

    Hope this helps.

  • Dave Rusin says:

    Plenty of debt is opening up for healthy companies with pent-up demand and organic growth.

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