You knew it couldn't be good when ftwr filed an NT 10-Q last week, delaying its quarterly report. Today the company not only continued that delay, but also had its chairman and two directors resign from the board as the company acknowledged that it elected to not make a $1.3M interest payment on its 9% converts yesterday. The debt in question comes due in November of next year, but I guess they're going to make their stand now.
That non-payment will turn into a default in 30 days, during which FiberTower will be evaluating its options to manage its debt load. The company restructured some of its debt in a debt for equity swap just last year, as its hybrid fiber/wireless backhaul business just hadn't managed to get the scale it needed. That bought them time, but it does not seem to have been enough. Early customer terminations in the third quarter have brought things to a head, with $150-170M in asset impairments expected to result for Q3.
So what now for FiberTower? They wouldn't have taken this path if additional funding were available, so three options seem to present themselves:
- another debt for equity swap
- a bankruptcy filing
- a sale of the company to someone with deeper pockets and a desire for a bigger foothold in wireless backhaul
That last option might be feasible though. These days the economics behind fiber-to-the-tower are falling into place, if one owns a large enough metro fiber plant to begin with -- which of course FiberTower doesn't. FiberTower's existing carrier relationships and backhaul footprint might fit very well with a metro fiber operator interested in adding a hybrid fiber/microwave capability to their offering in tier 1 markets nationwide.
Zayo would be an obvious candidate, but they're probably too busy with 360Networks right now. But a less obvious one might be AboveNet who hasn't really dabbled as much in fiber-to-the-tower but could jumpstart such an effort rather easily with FiberTower's assets.
The directors that have resigned are the chairman John Kelly and directors Phil Kelley and Randall Hack. The company also received notice from the NASDAQ that it faces de-listing, but that seems to be the least of their problems at the moment.
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