Alaska Communications to amend facility in connection with merger

By Sara Rosenberg

New York, Aug. 1 - Alaska Communications Systems Group Inc. released details on its amendment request in a company presentation as it held a lender call on Wednesday morning to launch the transaction.

Under the proposal, the company would increase pricing on its term loan to Libor plus 450 basis points from Libor plus 400 bps, with the 1.5% Libor floor remaining intact.

Also, revolver pricing will be lifted to Libor plus 450 bps, with a step-down to Libor plus 425 bps at 4 times total leverage, from Libor plus 400 bps with a step-down to Libor plus 375 bps. This tranche will keep its 1.5% Libor floor as well.

If ratings fall below B2 or B, pricing on the entire facility will increase by 25 bps.

The revolver would also be reduced to $20 million from $30 million, according to the presentation.

More terms of the amendment include increasing term loan amortization to 0.50% per quarter from 0.25% per quarter and raising the free cash flow sweep to 75% from 50%.

Additionally, the senior secured leverage ratio will be changed to 5 times through June 30, 2014, 4.7 times through Dec. 31, 2014 and 4.4 times thereafter, from a current ratio of 4.4 times.

The total leverage ratio will be reset to 6.25 times through June 30, 2014, 5.75 times through Dec. 31, 2014 and 5.25 times thereafter, from 5.25 times currently.

And, the fixed charges coverage ratio will be revised to 2.25 times through June 30, 2014, 2.5 times through Sept. 30, 2015 and 2.75 times thereafter, from 2.75 times currently.

Furthermore, the amendment will revise the collateral for the credit facility and change some financial definitions.

With the amendment, the company will pay down $50 million of its term loan debt at par.

Lenders are being offered a 25 bps amendment fee.

J.P. Morgan Securities LLC is leading the amendment.

Consents are due on Aug. 8.

The amendment is connected to the company's agreement to form Alaska Wireless Network LLC through the merger of its and General Communications Inc.'s (GCI) wireless networks.

Under the agreement, Alaska Communications and GCI will each contribute their respective wireless assets, including spectrum licenses, cell sites and backhaul facilities, switching systems and certain other assets necessary to operate an Alaska statewide wireless network.

As part of the transaction, GCI will purchase $100 million of wireless assets from Alaska Communications and contribute them to Alaska Wireless Network.

Alaska Communications will use the proceeds from the sale to pay down the term loan and to increase cash reserves.

At close, Alaska Communications will own one-third and GCI will own two-thirds of Alaska Wireless Network. During the first four years of Alaska Wireless Network's operations, Alaska Communications will be eligible to receive preferential cash distributions totaling $190 million and GCI will receive all remaining available cash distributions over the same period. Following the initial four-year period, the companies will receive distributions proportional to their ownership interests.

Closing is expected by the second quarter of 2013, subject to Hart-Scott-Rodino review, FCC approval and other customary conditions.

Alaska Communications is an Anchorage-based provider of broadband and other wireline and wireless solutions. GCI is an Anchorage-based provider of voice, data and video services.

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