KMC Telecom intends to repurchase more notes

By Peter Heap

New York, Nov. 9 - KMC Telecom Holdings, Inc. said it intends to buy back more of its outstanding senior discount notes and senior notes in order to take advantage of the "substantial discounts" at which they are trading. Buybacks would reduce the Bedminster, N.J. company's future cash interest payments and the amounts due at maturity.

However KMC Telecom noted in a filing with the Securities and Exchange Commission that it requires advance written consent from its senior lenders to make further repurchases.

KMC said purchases could be in the open market or in privately negotiated transactions and it may pay either cash or exchange them for stock or for acquire the notes for a combination of cash and stock.

Buybacks would also be subject to market conditions, the company's liquidity and its prospects for future access to capital.

During the second quarter, KMC Telecom said it bought back 39% of its senior discount notes with a carrying value of $135.1 million at a cost of $19.2 million in cash. These repurchased notes are held by one of the company's subsidiaries and have been pledged as additional collateral to its credit facility lenders, KMC said in the SEC filing.

KMC does not have to pay principal or interest on these notes although if there is a default under the credit facility and the lenders accelerate the borrowings or exercise their rights under the pledge agreement then the amounts due on the notes would become payable and would be applied to KMC's obligations under the credit facility.

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