Metromedia completes $611 million financing

By Peter Heap

New York, Oct. 2 - Metromedia Fiber Network, Inc. said it completed a $611 million financing package made up of a $150 million note purchase facility led by Citicorp, USA, $230 million of convertible debt and $231 million in vendor financing.

The company also announced senior management changes and said it expects to be EBITDA (earnings before interest, taxation, depreciation and amortization) positive in 2002, one year earlier than previously.

Metromedia's $150 million note purchase facility will have a five-year term and carries an interest rate of Libor plus 550 basis points or the base rate plus 450 basis points. Metromedia also issued warrants to buy 203.5 million shares of the company's class A common stock at an exercise price of 54 cents per share.

The $230 million of convertible debt is made up of 8.5% convertible senior notes due 2011. It converts into shares of the company's class A common stock at an exercise price of 54 cents per share. Of the $230 million total, $180 million will be purchased by affiliates of the company and $50 million by a subsidiary of Verizon Communications.

The $231 million of vendor financing will have a 5 ½ year term and will bear an interest rate of 14%. Metromedia issued the vendor a warrant to purchase 84.8 million shares of class A common stock at 54 cents per share.

In addition, Metromedia is issuing equity to vendors that agreed to take it in exchange for equity. These vendors will receive 121 million shares of class A common stock, $89 million of convertible notes convertible into shares of its class A common stock at 54 cents per share and warrants to purchase an additional 47.3 million shares at 54 cents per share.

Metromedia and Verizon also adjusted the conversion price on $500 million of the company's 6.15% convertible subordinated notes due 2010 to $3 per share from $17 per share.

"Our ability to obtain this high level of financing amid a very challenging economic environment demonstrates tremendous confidence from our lenders and our vendors in our business fundamentals and our long-term prospects in this industry," said Nick Tanzi, the new chief executive officer of Metromedia, in a news release.

Metromedia also announced management changes. Mark Spagnolo will by president and chief operating officer, reporting to Tanzi. Spagnolo was chief executive officer and chairman of the board of Sitesmith, a company acquired by Metromedia. He was previously president and chief executive officer of UUNet and a senior executive at EDS.

Tanzi becomes will take over as CEO, reporting to the board of directors. Metromedia founder Stephen Garofalo continues as chairman of the board.

Metromedia also said that because of the "continued general economic weakness" it is revising its quarterly and year 2001 revenue guidance downward. It now expects revenue for the year of between $360 million and $367 million.

However is said that thanks to expense reductions and cost control it now anticipates becoming EBITDA positive early in 2002, one year ahead of previous guidance.

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