Grande Communications announces details of recapitalization agreement

By Caroline Salls

Pittsburgh, Aug. 31 - Grande Communications Holdings, Inc. announced the details of its recapitalization agreement with ABRY Partners VI LP in connection with the note purchase agreement entered into with the holders of $191.8 million of its $193 million in principal amount of the company's outstanding senior notes, according to an 8-K filed with the Securities and Exchange Commission.

Under the recapitalization agreement:

• Grande wholly owned operating subsidiary Grande Communications Networks, Inc. will be converted to a Delaware limited liability company that is disregarded for Federal income tax purposes at least two days before closing;

• One day after the conversion, the operating subsidiary will distribute $1 million in cash to Grande Holdings for its future working capital needs;

• Grande Holdings will contribute operating assets to Grande Communications, which will assume all of the operating liabilities arising from its business;

• ABRY and Grande Manager LLC, a newly formed wholly owned subsidiary of ABRY, will contribute $97 million in cash to ABRY wholly owned subsidiary Grande Investment LP in return for a general partner interest and a limited partner interest of Grande Investment representing 74.3% of the limited partner interests and a 1% general partner interest. This amount will ultimately be contributed to Grande Communications;

• ABRY will contribute $12.7 million in cash to Grande Investment in return for a preferred limited partnership of Grande Investment. This amount will ultimately be contributed to Grande Communications;

• Grande Holdings will contribute all of the outstanding membership interests of Grande Communications to Grande Investment in return for a general partner interest of Grande Investment representing 24.7% of the common equity of Grande Investment;

• Grande Communications will receive $103.8 million of net proceeds under a new credit facility arranged by ABRY, consisting of a $103.8 million term loan and an $18.7 million revolving credit facility, up to $1.0 million of which may be drawn at closing; and

• The net proceeds from the equity and debt financing transactions will be used to buy back and redeem all of Grande Holdings' outstanding 14% senior secured notes due 2011 and pay off some outstanding capital lease obligations.

Buyback agreement

As previously reported, the noteholders have agreed to sell their notes to the company upon completion of a proposed recapitalization agreement with ABRY Partners.

The participating noteholders include Serengeti Overseas Ltd., Serengeti Partners LP, Goldman, Sachs & Co., Silver Point Capital Offshore Fund, Ltd., Silver Point Capital Fund, LP, MAST OC I Master Fund LP, MAST Credit Opportunities I Master Fund Ltd. and Whitney Private Debt Fund, LP.

Under the purchase agreement, the noteholders have agreed to a purchase price of 101.5% of the principal amount of the notes, plus interest accrued through the purchase date, which is 200 basis points lower than what would have otherwise been required under the redemption provisions of the notes indenture.

In addition, the noteholders have agreed to waive all registration rights they may have on the senior notes or any equity securities of Grande.

ABRY has provided a limited guaranty of Grande's performance under the purchase agreement.

Grande Communications is a San Marcos, Texas-based provider of high-speed internet, local and long-distance telephone and digital cable services.

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