Mexico's Maxcom lacks support for exchange offer; restructuring likely

By Susanna Moon

Chicago, April 25 - Maxcom Telecomunicaciones, SAB de CV said it failed to garner enough support to complete the exchange offer for its 11% senior notes due 2014 and is now considering its options, including filing for Chapter 11.

Holders had tendered $123,856,000 or 61.93%, of the 11% notes as of 5 p.m. ET on April 24, short of the 80% minimum tender condition in the offer.

The company said on April 11 that it amended and extended the exchange offer, noting that its ability to continue as a going concern was in jeopardy as the offer dragged on.

What's more, Maxcom said it would likely default on the coupon payment due June 15 if the exchange offer failed and it was unable to secure financing.

In that case, noteholders and other creditors could begin involuntary bankruptcy proceedings against the company in Mexico or in the United States, the company said.

The company said before that if it was unable to complete the exchange offer and secure additional capital and liquidity, then it would have to evaluate other options to conserve its cash and restructure its debt obligations including debt forgiveness, an extension of maturity and a lower coupon.

As noted before, the related equity tender offer for all of the company's series A common stock and related CPOs and ADSs was conditioned on completion of the exchange offer.

Exchange offer

The exchange offer expired at 5 p.m. ET on April 24, after begin pushed out by 10 days on April 22.

At the time, the company also increased the minimum tender condition in the offer to 80% from 61.44%, subject to the company's right to drop the minimum tender condition to 75.1%.

Maxcom had planned to issue new step-up senior notes due 2020 in exchange for the 11% notes.

The coupon on the new notes was bumped up by 100 basis points to 7% until June 14, 2016, by 100 bps to 8% until June 14, 2018 and by 200 bps to 10% after that.

Investors had tendered $84,268,000, or 42.13%, of the 11% notes as of 5 p.m. ET on April 10, down from $120,172,000, or 60.09%, 11% senior notes due 2014 tendered as of March 14.

Before the most recent changes, the early tender deadline was moved to 5 p.m. ET on March 27 from 5 p.m. ET on March 13.

Maxcom pushed back the early deadline after having received no tendered notes as of 5 p.m. ET on Feb. 28. The early participation date was originally set at 5 p.m. ET on March 5 and the offer expiration at 5 p.m. ET on March 20. The offer began on Feb. 20.

More on potential filing

If the exchange offer failed, the company planned to implement a restructuring by beginning voluntary cases under Chapter 11 of the United States Bankruptcy Code through a plan of reorganization, seeking expedited confirmation of a plan of reorganization or seeking other forms of bankruptcy relief, all of which, the company said, involve uncertainties, potential delays, reduced payments to all creditors and litigation risks.

The company also added that a restructuring under Chapter 11 could result in noteholders "receiving new notes with terms that may be materially less favorable" than those being offered under the debt exchange offer.

More offer details

Maxcom said on March 7 that it amended the offer to add an obligation that it make an offer to repurchase the new notes at 85% of the principal amount with a portion of the capital contribution it receives from shareholders exercising their preemptive rights. The roughly $45 million capital contribution is to be made by the purchaser of the company in connection with the equity tender offer for Maxcom's series A common stock and related CPOs and ADSs.

The company previously amended the exchange offer to clarify that it was conditioned on the capital contribution.

Holders needed to tender a minimum principal amount of $2,000 notes in order to participate.

As noted before, the principal amount of old notes outstanding was $200 million, and the maximum principal amount of the new notes that would have been issued in the exchange offer was $200 million.

The company also solicited consents to some proposed amendments to the indenture governing the old notes that would eliminate substantially all of the covenants other than the covenant to pay principal and interest when due and eliminate most events of default.

The proposed amendments also would have facilitated the structure that allows the new notes to be secured by the old notes tendered in the exchange offer, thereby indirectly benefiting from the collateral that secures the old notes.

By tendering old notes, holders were consenting to the proposed amendments.

More deal terms

Holders who tendered by the early participation date would have received $1,000 principal amount of new notes for each $1,000 principal amount of old notes.

Holders who tendered after the early participation date but before the offer expiration would have received $930 principal amount of new notes for each $1,000 principal amount of old notes.

The company previously said it would only accept old notes for exchange if at least 90%, including any old notes owned by the company, of the old notes were tendered, and the proposed amendments were only to be effective if a majority, not including any old notes owned by the company, of the old notes had been tendered.

Between Jan. 1, 2012 and May 31, 2012, the company acquired $22.9 million principal amount of the old notes, which are held in the company's treasury. The company said that if it received tenders from holders of at least 90% of the old notes, it would cancel the $22.9 million of old notes it holds.

The information agent was D.F. King & Co., Inc. (800 967-4607).

Maxcom, based in Mexico City, is a telecommunications provider of last-mile connectivity to micro, small and medium-sized businesses and residential customers.

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