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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