Otelco makes $3 million voluntary prepayment on CoBank agreement

By Sarah Lizee

Olympia, Wash., June 11 – Otelco Inc. made a $3 million voluntary prepayment on its debt held by CoBank, ACB, as administrative agent, issuing lender and swing line lender, according to a press release.

The company said it made the prepayment on May 31, lowering the outstanding loan balance to $81.8 million.

At current interest rates, the additional payment will reduce annual interest cost by just under $200,000.

No fees or penalties were associated with the prepayment, and the company has the option to offset its 2018 excess cash flow payment due in March 2019 by the prepayment amount.

The next quarterly principal payment of $1.1 million is scheduled for June 29.

The CoBank agreement also provides for a reduction in the interest rate margin on the loan to 425 basis points from 450 bps once the company lowers its leverage ratio below 3 times, which it expects to do this year. This would represent an additional savings in interest expense of about $200,000 per year.

The prepayment was announced in conjunction with the company’s acceptance of the FCC’s revised Alternate Connect America Model (A-CAM) funding.

Oneonta, Ala.-based Otelco provides wireline telecommunications services.

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