Alaska Communications Systems tenders for 9 3/8%, 9 7/8% notes

By Paul Deckelman

New York, Jan. 13 - Alaska Communications Systems Group Inc. said that its subsidiary, Alaska Communications Systems Holdings, Inc., has begun a cash tender offer for any and all of the latter's $147.5 million outstanding principal amount of 9 3/8% senior subordinated notes due 2009 and for up to $59.35 million outstanding principal amount of its 9 7/8% senior notes due 2011, and is also soliciting noteholder consents to proposed changes in the notes' respective indentures.

The changes to the senior subordinated notes' indenture would, among other things, eliminate substantially all of the restrictive covenants and eliminate most events of default other than failure to make payments of interest or principal. The proposed amendments to the senior notes indenture would, among other things, increase the amount of senior secured bank indebtedness that Alaska Communications Systems Holdings and its subsidiaries may incur.

The company set a consent deadline of 5 p.m. ET on Jan. 25 and said the offer would expire at 9 a.m. ET on Feb. 10, with both deadlines subject to possible extension. Holders who tender their

notes by the consent deadline will be able to withdraw their tenders and revoke their consents only until that deadline.

Alaska Communications Systems, an Anchorage, Alaska-based telecommunications service provider, said that subject to certain conditions, holders of the senior subordinated notes who validly tender by the consent deadline will receive $1,046.88 per $1,000 principal amount, including a consent payment of $30 per $1,000 principal amount.

Subject to certain conditions, holders of the senior notes who validly tender by the consent deadline, and whose notes are accepted by the company for purchase, will receive $1,098.75 per $1,000 principal amount, consisting of tender offer consideration of $1,088.75 per $1,000 principal amount of senior notes and a consent payment of $10 per $1,000 principal amount. Tenders of the senior notes will be subject to pro-ration in the event that tenders for more than $59.35 million principal amount of the notes are received. All senior notes validly tendered and not withdrawn by the consent deadline which are not purchased by the company due oversubscription will still be eligible to receive the $10 per $1,000 consent payment.

Holders tendering either class of notes after the consent deadline will not be eligible to receive the respective consent payment for their notes. Holders of the senior subordinated notes would receive a purchase price of $1,016.88 per $1,000 principal amount, while holders of the senior notes, whose notes are accepted, would receive a purchase price of $1,088.75 per $1,000 principal amount.

Alaska Communications Systems Holdings is making the tender offers and consent solicitations as part of a refinancing of a portion of its existing debt. It intends to finance the tender offers and consent solicitations with a portion of the term loan borrowings under a proposed new $385 million senior secured credit facility, the proceeds of a proposed $75 million equity offering by parent company Alaska Communications Systems and cash on hand.

The tender offers and consent solicitations are subject to the valid tender of a majority of the outstanding principal amount of senior subordinated notes and senior notes as well as the related consents. They are also subject to the company arranging the new senior secured credit facility, successful completion of the equity offering and other customary general conditions.

Alaska Communications Systems Holdings has entered into agreements with holders of $50.2 million or 28.3% of the senior notes under which those holders have agreed, subject to certain conditions, to tender their notes and deliver their consents.

J.P. Morgan Securities Inc. (866 834-4666 or 212 834-3424) and CIBC World Markets Corp. (212 885-3745) are dealer managers and solicitation agents. Global Bondholder Services Corp. is depositary (800 558-3745).

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