Alaska Communications launches $55 million term loan add-on, amendments for note buyback

By Sara Rosenberg

New York, July 6 - Alaska Communications Systems Holdings Inc. approached lenders Wednesday looking for an incremental term loan of up to $55 million, with an initial actual size of $34 million, according to an investor presentation posted by the company.

Proceeds from the initial $34 million add-on will be used along with cash on hand to fund the repurchase of $34.3 million 9 7/8% senior unsecured notes due 2011 at a price of $1,105.70 per note. The company is looking for a larger commitment than initially needed so that it could, if it wants to, repurchase additional 9 7/8% notes.

The terms - including pricing of Libor plus 200 basis points - and the rights and obligations of the incremental loan will be identical to the existing term loan except the maturity will not accelerate from Feb. 1, 2012 to March 31, 2011 should the notes not be repaid prior to that time.

The company plans on entering into an interest rate swap agreement to fix the interest rate on the initial incremental term loan and estimates that this series of transactions will reduce its current weighted average cost of debt and reduce cash interest expense.

As part of the amendment, Alaska Communications is asking new and existing lenders to allow the use of cash at a later date if the $55 million term loan add-on is not used in full to repurchase the notes by July 29.

In addition, lenders are being asked to consent to the exclusion of the senior notes redemption from the definition of cumulative distributable cash, subject to pro forma minimum liquidity of $55 million, to the extent notes are purchased with cash.

Commitments to the incremental term loan are due by 5 p.m. ET on July 12. Amendment consents are due by 5 p.m. ET on July 14.

Closing is scheduled for July 15.

This transaction will allow the company to reduce its cost of debt capital, maintain total leverage at 4.3x, significantly increase financial flexibility and increase interest coverage to 3.4x from 3.3x, the presentation added.

Alaska Communications is an Anchorage, Alaska, integrated communications provider.

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