Otelco refinances with new credit facilities totaling $105 million

By Wendy Van Sickle

Columbus, Ohio, Jan. 25 – Otelco Inc. executed new credit facilities totaling $105 million on Monday, according to an 8-K filed with the Securities and Exchange Commission.

Under a new senior loan agreement, Cerberus Business Finance, LLC will extend a new $85 million five-year first-lien term loan facility to Otelco and also provide a new $5 million revolving credit facility.

The first-lien term loan and the revolver bear interest at Libor plus 775 basis points with a 1% Libor floor.

At closing, the first-lien loan was fully drawn, and the revolver was undrawn.

Also on Monday, Otelco entered into a subordinated loan agreement with NewSpring Mezzanine Capital III, LP providing for $15 million in term loans, which was fully drawn at closing. The agreement has a 5.5-year term.

The senior subordinated term loan bears cash interest at 12% and paid-in-kind interest at 2%.

Proceeds of the term loans and the revolver will be used to refinance Otelco’s existing debt under its credit agreement with General Electric Capital Corp. as agent and to fund working capital of the company and its subsidiaries.

Otelco is an Oneonta, Ala.-based traditional wireline telephone services provider.

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