Deltacom Plans to Raise $325M, Pre-announces

February 1st, 2010 by · 12 Comments

Southeastern CLEC itcd they announced that it intends to sell $325M in senior secured notes due 2016 to qualified institutional buyers this week.  Then intend to use the proceeds to refinance their senior secured credit facilities, which totaled $307M or so at the end of the third quarter.  The credit facilities will come due in 2013 and 2014 so there was no huge urgency to refinance, and the interest rates are pretty low currently so if anything their interest expenses will rise.  However, the terms are (I believe) fairly covenant-heavy, and therefore what Deltacom is doing here is probably about flexibility.

Simultaneously, Deltacom offered a preview of their full year 2009 performance today.  Deltacom generally reports at the last minute, often after they have actually filed with the SEC.  Hence, this preannouncement is obviously directly.  Full year revenues are expected to be $469M, which puts the Q4 number around $112M, down another 4-5% sequentially.  Full year EBITDA is projected at $88M, which puts Q4 EBITDA at $20M, down about $3M sequentially.  The company finished the year with $68M in cash.  The company doesn’t give much guidance and the street doesn’t follow them much, but these results are probably in-line with expectations.  

Deltacom also offered a breakdown of core and non-core revenues over the past few years, telling a familiar story of extensive non-core shrinkage alongside core growth.  Non-core revenues have declined from 35% of total revenues in 2006 to just 21% or so in 2009.  That’s a lot lower now, which implies that the company is closer to a period of growth as its core services become dominant – but we’re still not there just yet.  With economic recovery, however, perhaps Deltacom will find 2010 to be more favorable hunting ground.

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Categories: CLEC · Financials

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12 Comments So Far

  • DaveRusin says:

    After “banker” fee’s … they are no better off outside of delaying the principle … how does this garden grow?

  • ex-banker says:

    dumping maint covenants and extending maturities substantially lowers their default risk. Too bad the facts don’t mesh with rusin’s tiresome banker-bashing.

    • DaveRusin says:

      State your name – don’t hide …

      I know a CEO of a public Telecom firm, ex-Banker. By far, he has told me, running a telecom firm is the hardest thing he has ever done — “too much like work.” He admits banking is easy, little differentiation, little value-add and a whore’s game.

      He thought running a company would be easier than I Banking. After all, he saw all the spreadsheets.

      Don’t hide ….

      Still, how does the Garden Grow?

      • ex-banker says:

        Read my name more closely — it says ex-banker. Also, I never said it was easy to run a company and know well that it is far easier to do than take potshots and advise from afar. Just as it’s easy for you take potshots at bankers.

        Nonetheless, I stand by my comments that dumping maintenance covenants and extending maturities is the right thing for Deltacom. A more flexible capital structure gives them a much better shot of living to fight another day. It won’t solve any business issues they have, but it gives them room to make decisions that are right for the long term.

  • Anonymous says:

    Rusin, don’t be such a hard head. Having a gun to your head in the way of covenants highly restricts you from doing many things, which includes investing in your network and customer acquisition.

    How do they grow the garden? Just like every other CLEC… better customer experience, more affordable and diverse product set, excellent network. All of which the exec team can now focus more freely on with the gun removed.

    Either that or get acquired in more of a position of strength versus a distressed situation.

  • peter burke says:

    extending maturities in this environment was Exactly the right thing to do. The garden survives, to possibly grow another day.

  • ES says:

    Good fodder, thanks for teasing out discussion Dave.

  • Deltacom Agent says:

    This company is about to experience a significant loss of customers and therefore revenue. They terminated 90% of their agent program. Agents have deep rooted relationships with their customers. The terminated agents are ALREADY switching their customers to other carriers. It”s that simple. Deltacom has NO unique product or offering that any other CLEC can’t provide which makes them a priced based carrier. Most customers don’t choose Deltacom because Deltacom is so well known. It’s a result of the relationship with their agent, Deltacom will realize the mistake they made. Operation account migration has started.

  • John Garner says:

    I have recently considerd becoming a DeltaCom agent. Would I be making a mistake?

  • John Garner says:

    I’ve considered becoming a DeltaCom agent?
    Would I be making a mistake?

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