CommScope sees possible covenant non-compliance in Q3; seeking to replace revolver

By Sara Rosenberg

New York, Aug. 14 - CommScope Inc. said that based on current forecasted operating results it anticipates it will not comply with its amended debt to EBITDA covenant at the of the third quarter 2002, according to a filing with the Securities and Exchange Commission. Furthermore, the company expects to replace its existing revolver in the fourth quarter of 2002.

If the non-compliance expectation proves true, the company plans to further amend the eurodollar credit agreement and the operating lease agreement or to repay these borrowings using current cash balances, the filing said. At June 30, the company had about $11 million outstanding under the eurodollar agreement and about $13 million in contractual cash obligations under an operating lease.

"However, given the current credit environment and our recent operating results, it is likely that the terms under which all three of these existing agreements can be further amended or replaced, if at all, may be less favorable to us than the current terms of these agreements," the filing said.

At June 30, there were no outstanding borrowings under the revolver and CommScope does not anticipate drawing on the loan since cash from operations is expected to cover working capital requirements.

The amended revolver provides a total of $250 million in commitments and expires in December 2002. Borrowing capacity under the facility is based on certain financial ratios that are affected by the level of outstanding long-term debt and profitability, according to the SEC filing. At June 30, the borrowing capacity was approximately $36 million.

The credit facility was amended in June to resolve a potential non-compliance issue with the debt to EBITDA covenant in the second quarter of 2002 due to difficulties in the fiber optic cable market and poor performance of OFS BrightWave. Under the amendment, the revolver was reduced to $250 million from $350 million and non-cash equity losses and gains related to OFS BrightWave were excluded from certain ratios.

CommScope is a Hickory, N.C. manufacturer of broadband coaxial cable.

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