KMC Telecom amends credit facility, delaying principal payments, waiving compliance

New York, May 17 - KMC Telecom Holdings, Inc. said it amended its credit facility, delaying some principal payments, waiving failure to comply with covenants and amending future covenants to make them less restrictive.

However the company warned in a filing with the Securities and Exchange Commission that longer term it expects to have to further extend principal and interest payments on the facility or to need to reduce its overall debt by a recapitalization or asset sales.

Under the latest amendment, the size of the facility remains at $700 million with $37.9 million unused at May 6, the effective date of the amendment. Of the available credit, $35.1 million can be used to buy telecommunications equipment and for working capital and $2.8 million for letters of credit.

Under the amendment, some lenders agreed to defer payment of at least $26 million of principal due April 1, 2003 to June 30, 2003 in exchange for $43.0 million maturity value of 12½% senior discount notes due 2008 that had been repurchased by KMC and 15% of any additional notes purchased by the company.

The payment deferred is scheduled principal payments on KMC's term loan B and any mandatory prepayments of principal on its revolver. If both are fully utilized, the amendment defers at least $26 million of the $35 million due on April 1, 2003.

The amendment also provides the company with access to the $.9 million proceeds of the sale in February of two Tier III markets.

In the second quarter, KMC spent $5.4 million to buy senior notes with a maturity value of $67.2 million, of which $10.1 million will be transferred to the deferring lenders.

Those purchases followed buybacks of $98.9 million maturity value of senior discount notes during the first quarter at a cost of $4.2 million, the SEC filing said.

As of May 15, 2002, KMC and its affiliates own approximately 64% and 81% of the original issuances of the 12½% senior discount notes and 13½% senior notes due 2009 respectively. KMC originally sold $250 million in proceeds of the discount notes and $275 million of the cash-pay senior notes.

In addition to the purchases already completed, KMC used $4.8 million of cash in the first quarter to acquire options from Dresdner Kleinwort Capital to repurchase senior notes with a maturity value of $78.6 million. KMC said it expects to exercise the option in the second quarter "for a nominal fee."

Wachovia Bank, NA is administrative agent for the loan and CIT Lending Services Corp. is collateral agent.

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