Otelco Emerges from Bankruptcy with New Credit Facility and New Listed Security
May 24 2013 - 11:43AM
Business Wire
Otelco Inc. announced that it has emerged from bankruptcy and
completed its balance sheet restructuring process, including an
extension of its senior credit facility.
“Today, we completed the actions necessary to implement the
final steps of our restructuring Plan,” said Mike Weaver, President
and Chief Executive Officer of Otelco. “Our total debt has been
reduced by more than 50%, our senior credit facility has been
extended through April 2016, and we have exited Chapter 11
bankruptcy. Our customers have been provided uninterrupted service
during our restructuring, and our vendor partners have continued to
receive payment in full for the goods and services they provide
Otelco.”
The Company repaid $28.7 million on its senior credit facility
and extended its maturity through April 2016. The remaining balance
of $133.3 million will have quarterly principal payments of 1.25%
of the new loan amount plus interest on the outstanding balance at
6.5%. In addition, the Company will utilize 75% of its quarterly
free cash flow to further reduce the outstanding balance on the
loan each quarter. The facility includes a $5.0 million revolver
which was undrawn at closing. These actions, along with the actions
described below, complete the requirements of the Company's
pre-packaged Plan and allow Otelco to exit bankruptcy today.
“A special thank you goes to our Board of Directors for guiding
the restructuring process,” added Weaver. “We appreciate the years
of service provided by Bill Bak, Bob Guth, and Bill Reddersen, as
they leave the Otelco Board today. We are excited to have three
very experienced new members joining our Board. Norman Frost, Brian
Ross and Gary Sugarman bring many years of telecommunications and
management experience to their new positions. Short biographical
information is included on each individual. Additional details of
the Board composition and committee structure will be included in a
Form 8-K to be filed shortly.
“Our existing Class A stock and the majority of our subordinated
debt traded together as an IDS on both the NASDAQ Global Market and
the Toronto Stock Exchange,” noted Weaver. “Today will be the last
trading day for our IDSs. Our old Class A shares were part of the
IDS and will be extinguished. Five of the subordinated debt bonds,
including the bonds that were part of the IDS, will be exchanged
for one new Class A share which will trade under the symbol OTEL on
the NASDAQ Global Market beginning after the Memorial Day holiday.
To provide a simple example, holders of 100 IDS units will receive
20 shares of our new Class A stock. Subject to dilution by a
management equity plan, existing sub-note holders will retain over
85% of the ownership of Otelco. Due to the consistent low level of
trading on the Toronto Stock Exchange, Otelco’s new Class A shares
will not be listed on that exchange.”
New Otelco Board Members
Norman C. Frost - Mr. Frost is currently a private
investor. He served on the Board of Directors of Iowa Telecom from
2006 until its acquisition by Windstream in 2010. Mr. Frost
worked as an investment banker for over 25 years, focusing
primarily on the telecommunications industry, where he executed a
wide range of assignments for his clients, including international
and domestic mergers and acquisitions, valuations, public and
private equity and debt offerings, and project financings. He was a
Managing Director of Legg Mason Wood Walker, Inc. and head of that
firm’s Technology sector in the Investment Banking Department from
1998 to 2005. Prior to joining Legg Mason, Mr. Frost was a
Managing Director in the Communications Group at Bear,
Stearns & Co. Inc. and started his investment banking
career at The First Boston Corporation.
Brian A. Ross - Mr. Ross is currently an independent
consultant. Until December 2012, Mr. Ross served as President and
CEO of KnowledgeWorks, an educational non-profit that provides
innovative methodologies to teachers, administrators and local
community leaders to more effectively prepare their students for
college and 21st century careers. Prior to joining KnowledgeWorks,
Mr. Ross served in various financial and operations roles in a
13-year-tenure at Cincinnati Bell (sym: CBB), including Chief
Financial Officer and Chief Operating Officer. Mr. Ross has also
served in various financial capacities for US Shoe (formerly: USF),
Student Loan Funding, and The Mead Corporation (formerly: MEA, now:
MWV). He serves on the Board of Directors for Alaska Communications
(sym: ALSK) where he is a member of the audit committee and is the
chairperson of the compensation committee.
Gary Sugarman - Mr. Sugarman is Managing Member of
Richfield Capital Partners, a venture fund formed in May 2010 to
provide working capital investments in the technology/media sectors
and a principal of Richfield Associates, a telecom
investment/merchant bank which he founded in 1993. Over a 20-year
period, Mr. Sugarman has invested in and operated numerous
telecom/data companies through these entities. Mr. Sugarman sits on
the board of TDS Telecom (sym: TDS), a publicly traded telecom
company with both wireless and wireline assets; and LICT Corp (sym:
LICT), which owns telecom operating companies and other telecom
assets. Mr. Sugarman was, until recently, Executive
Chairman/Investor- FXecosystem Inc, a private company based in
London, and, from 2007 until 2010, Executive Chairman/Investor -
Veroxity Technology Partners, a metro fiber provider in Boston. He
also served as Chairman and Chief Executive Officer of Mid Maine
Communications, a facilities-based telecommunications company he
co-founded in 1994, until its sale in 2006 to Otelco.
ABOUT OTELCO
Otelco Inc. provides wireline telecommunications services in
Alabama, Maine, Massachusetts, Missouri, New Hampshire, Vermont and
West Virginia. The Company’s services include local and long
distance telephone, network access, transport, digital high-speed
data lines and dial-up internet access, cable television and other
telephone related services. With more than 98,000 voice and data
access lines, which are collectively referred to as access line
equivalents, Otelco is among the top 25 largest local exchange
carriers in the United States based on number of access lines.
Otelco operates eleven incumbent telephone companies serving rural
markets, or rural local exchange carriers. It also provides
competitive retail and wholesale communications services through
several subsidiaries. For more information, visit the Company’s
website at www.OtelcoInc.com.
FORWARD LOOKING STATEMENTS
Statements in this press release that are not statements of
historical or current fact constitute forward-looking statements.
Such forward-looking statements involve known and unknown risks,
uncertainties, and other unknown factors that could cause the
actual results of the Company to be materially different from the
historical results or from any future results expressed or implied
by such forward-looking statements. In addition to statements which
explicitly describe such risks and uncertainties, readers are urged
to consider statements labeled with the terms “believes,” “belief,”
“expects,” “intends,” “anticipates,” “plans,” or similar terms to
be uncertain and forward-looking. The forward-looking statements
contained herein are also subject generally to other risks and
uncertainties that are described from time to time in the Company’s
filings with the Securities and Exchange Commission.
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