Horizon PCS expects to violate covenants, hires financial advisor

By Peter Heap

New York, March 28 - Horizon PCS said it expects to violate one or more covenants in its credit facility this year and said it has hired a financial advisor.

The Chillicothe, Ohio cellular phone company said in a filing with the Securities and Exchange Commission that investment banking firm Berenson & Co. will be assisting it in its efforts to renegotiate or restructure its equity, debt and other contractual obligations.

If it cannot restructure its debt and other obligations it would need new financing, or have to find a purchaser or strategic partner for its business or seek bankruptcy protection.

At Dev. 31, 2002, Horizon PCS said it was in compliance with its bank facility covenants.

But it said "it is probable" that it will fail to comply with one or more during 2003.

Failure to comply would give the lenders the right to pursue remedies include accelerating amounts due. Acceleration would cause a default under Horizon's notes and give Sprint remedies under its agreement with the company.

Horizon PCS said it does not have enough liquidity to repay all the debt under these obligations.

As a result, its independent auditors say there is a "substantial doubt" about Horizon PCS' ability to continue as a going concern, according to the SEC filing.

Horizon PCS also said it does not have enough liquidity to allow it to follow its business plan and achieve positive cash flow from operations unless it obtains additional borrowing capacity under the senior credit facility, significant modifications in the amounts charged by Sprint under the management agreements, significant modifications in the amounts charged by the Alliances under the Network Service Agreement and/or a restructuring of its capital structure.

To achieve compliance with its bank covenants and fund operations, Horizon PCS said it:

* Plans to start negotiations with Sprint to change the amount paid under management agreements;

* Begin talks with its bank lenders to modify debt covenants and obtain any necessary waivers or forbearance agreements;

* Negotiate the right to borrow under its $95 million line of credit and modify repayment terms;

* Start negotiations or arbitration with the Alliances to reduce the amounts charged by the Alliances under the network agreements;

* Cut operating expenses and negotiate prices with vendors.

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