Otelco Wins CAF II Bid and Makes Voluntary Prepayments on Debt
September 19 2018 - 5:00PM
Otelco Inc. (Nasdaq: OTEL), a wireline telecommunication services
provider in Alabama, Maine, Massachusetts, Missouri,
New Hampshire, Vermont and West Virginia, announced today that
it has been awarded funding from the FCC’s CAF II auction for
services in Western Massachusetts and is further reducing its
leverage through voluntary prepayments on its CoBank debt.
CONNECT AMERICA FUND II (CAF
II)During August 2018, the FCC employed a reverse auction
to award additional Connect America Fund support for providing
improved broadband service in rural areas. The Company is
completing the post-auction requirements to receive just over $0.9
million for three contiguous locations in Western Massachusetts
during the ten-year funding period. These CAF II awards support the
construction of a fixed wireless network that will deliver services
to four targeted communities. Network deployment is expected to
begin in fourth quarter 2018, once FCC requirements, operational
agreements and regulatory approval have been completed.
“The FCC’s CAF II funding continues the focus of
bringing enhanced digital services to rural America,” commented Rob
Souza, President and CEO of Otelco. “When FCC Chairman Ajit Pai
visited our New Gloucester, Maine, office last week, we had an
opportunity to provide him with a first-hand view of how Otelco is
deploying ACAM and CAF funding in furthering the FCC’s goals. With
improved broadband availability and speeds, our rural customer base
can bridge the digital divide from both a business and personal
perspective.”
BALANCE SHEETOtelco indicated
in its second quarter 2018 earnings announcement that it planned to
make another voluntary prepayment on its debt held by CoBank, ACB,
as Administrative Agent, Issuing Lender and Swing Line Lender. On
July 31, 2018, and August 31, 2018, the Company made $1.0 million
and $2.0 million voluntary prepayments, respectively, lowering the
outstanding loan balance to $77.7 million. At current interest
rates, the additional payments will reduce annual interest cost by
just under $0.2 million. No fees or penalties were associated with
the prepayment, and the Company has the option to offset its 2018
excess cash flow payment due in March 2019 by the prepayment
amount. The next quarterly principal payment of $1.1 million is
scheduled for September 28, 2018. The CoBank agreement also
provides for a reduction in the interest rate margin on the loan
from 4.50% to 4.25% once the Company lowers its Leverage Ratio
below 3.0, which it expects to do at the end of third quarter. This
would represent an additional savings in interest expense of
approximately $0.2 million per year.
“It’s exciting to find new avenues to expand our
service offerings and improve the level of service available in
rural communities,” continued Souza. “We expect to increase our
capital investment in our business to approximately $9.0 million in
2019 and 2020, as we accelerate the deployment of fiber in our
territories. Our shareowners also benefit from the continued
reduction in leverage as we use available cash to accelerate the
repayment of our debt.”
ABOUT OTELCOOtelco 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, digital high-speed data lines, transport
services, network access, cable television and other related
services. Otelco is among the top 20 largest local exchange
carriers in the United States. Otelco operates eleven
incumbent telephone companies serving rural markets, or rural local
exchange carriers. It also provides competitive retail and
wholesale communications services and technology consulting,
managed services and private/hybrid cloud hosting services through
several subsidiaries. For more information, visit the
Company’s website at www.Otelco.com.
FORWARD LOOKING
STATEMENTSStatements 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. The Company assumes no obligation to update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by
applicable law.
Contact:Curtis
Garner Chief Financial
OfficerOtelco
Inc.205-625-3571Curtis.Garner@Otelco.com
Otelco (NASDAQ:OTEL)
Historical Stock Chart
From Aug 2024 to Sep 2024
Otelco (NASDAQ:OTEL)
Historical Stock Chart
From Sep 2023 to Sep 2024