Cogent Looking to Raise $150M

January 10th, 2011 by · 2 Comments

Few companies in the sector were as uncharastically quiet as Cogent Communications (NASDAQ:CCOI, news, filings) 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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Categories: Metro fiber

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2 Comments So Far


  • en_ron_hubbard says:

    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.

  • Suregato says:

    Can’t see Schaeffer ever wanting to give money to the shareholders.

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