Alaska Communications sees greater flexibility after loan refinancing

By Devika Patel

Knoxville, Tenn., Jan. 16 – Alaska Communications Systems Group, Inc. expects greater balance sheet flexibility after completing its recent credit agreement refinancing.

The company has reduced its leverage, which will also help strengthen its balance sheet.

“I’m very pleased to note that we successfully closed the refinance of our credit agreements,” president and chief executive officer Anand Vadapalli said at the 21st Annual Needham Growth Conference in New York on Wednesday.

“When we proactively initiated this work a few months ago, it was impossible to predict the volatility and challenging market conditions we saw, particularly in November and December, in the debt markets.

“I think it is indeed a testament to our credit group’s confidence in the credibility of our company’s business plan and our ability to execute against that plan whereby we successfully met all of the objectives with which we went into this transaction,” Vadapalli said.

The transaction results in better pricing on the loan tranches, an extension of the term loan’s maturity and greater flexibility and capacity for the company.

“Important highlights from this refinance transaction include retiring the high-cost A2 tranche while favorably repricing the new term loan compared to the A1 tranche, so we retired [a Libor plus 500 basis points] and [Libor plus 700 bps] tranche into a [Libor plus 450 bps] across the board, extending the term loan by two years, creating even greater stability and certainty for the business, creating flexible capacity with a delayed draw term loan of $25 million and a $20 million revolver, both of them undrawn right now, to enable investments in meaningful opportunities that we see ahead of us,” Vadapalli said.

“The delayed draw term loan capacity, as we clarified in the press release, is not for the purposes of financing any transactions as much as being specifically targeted to strengthening our fiber footprint and the support of contractor-driven revenue opportunities.

“The credit agreement also resets our key covenants while widening the thresholds and gives us a lot more flexibility as we operate the business,” he said.

The company has decreased its leverage which, combined with the refinancing transaction, gives the balance sheet more flexibility.

“We’ve reduced our leverage ratio to very healthy levels,” Vadapalli said.

“This sets the stage for future growth and shareholder value creation.

“Our balance sheet today allows us flexibility to consider investments in our business and returns for our shareholders, and this most recent announcement on our refinance sends a strong message to our investors about the confidence our lending group has in our business plan and in our ability to execute to our plan,” he said.

On Tuesday, Alaska Communications refinanced two term loan tranches, increased its revolving credit facility and secured a new delayed-draw term loan.

Under a new senior credit facility, the company established a $180 million term loan due 2024 with an interest rate of Libor plus 450 bps. This replaced the A1 tranche at Libor plus 500 bps and the A2 tranche at Libor plus 700 bps, both of which were due 2022.

The revolver was increased to $20 million from $15 million, and its interest rate was reduced to Libor plus 450 bps from Libor plus 500 bps.

The credit facility provides for a new $25 million delayed-draw term loan at Libor plus 450 bps. It is available for 24 months and will be used to strengthen the company’s fiber footprint in the support of contracted revenue opportunities.

The company said that at closing, the net total debt available to it will be $225 million, with $180 million drawn.

Subsidiary Alaska Communications Systems Holdings, Inc. is the borrower. ING Capital LLC is the bookrunner and joint lead arranger.

The refinancing reset the company’s key covenants “while widening the thresholds and providing us with greater flexibility,” Vadapalli said in a Tuesday news release.

The refinancing also created “an initial restricted payments basket of $5 million for dividends or share buybacks, while allowing additional restricted payments from certain operating cash flows, allowing the board to consider a range of shareholder-friendly actions,” Vadapalli added.

Alaska Communications is an Anchorage-based provider of broadband and other wireline and wireless services.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.