Horizon PCS files for Chapter 11 after lenders accelerate credit facility

By Carlise Newman

Chicago, Aug. 15 - Horizon PCS Inc., a PCS affiliate of Sprint, filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Southern District of Ohio after its lenders accelerated its bank facility.

On Aug.15, Horizon delivered to the lenders under its senior secured credit facility a certificate that indicated that the company failed to comply with a financial covenant for the second quarter of 2003 as required by the senior secured credit facility. The lenders elected to declare an acceleration of the loans under the credit facility, according to a filing with the Securities and Exchange Commission.

As of June 30, the company was not in compliance with its covenants with regard to its senior secured debt, which resulted in an event of default under the secured credit facility.

Horizon said in the SEC filing it intends to use the bankruptcy filing to:

* Enter into negotiations with Sprint to adjust the amounts charged under the Sprint management agreements to improve the company's cash flow from operations;

* Enter into negotiations with the credit facility lenders;

* Enter into negotiations or arbitration with the West Virginia and Virginia Alliances to reduce the amounts charged under the network agreements to improve the company's cash flow from operations;

* Reduce operating expenses by critically analyzing all expenses and entering into pricing negotiations with vendors;

* Consider closing or limiting service in under-performing markets;

* Close or reduce operations at 32 stores;

* Lay off 300 employees.

On July 17, Horizon PCS withheld payment on an invoice from Sprint PCS for services rendered in May and filed a dispute. On Aug. 11, Horizon PCS withheld payment on a portion of the invoice from Sprint for services rendered in June.

Horizon has been in discussions with Sprint to negotiate more favorable and economically viable support charges from Sprint.

Horizon previously retained investment bankers Berenson & Co. to assist in its efforts to restructure its equity and debt.

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