Zayo begins tender offer, consent bid for $350 million of 10¼% notes

By Susanna Moon

Chicago, June 4 - Zayo Group, LLC and Zayo Capital, Inc. said they began a cash tender offer for all of their $350 million outstanding principal amount of 10¼% senior secured first-priority notes due 2017.

Zayo is also soliciting consents to amend the notes to eliminate most of the restrictive covenants, eliminate events of default and release all the collateral securing the obligations under the notes.

The tender offer is being made in connection with Zayo's acquisition of AboveNet, Inc.

The total purchase price will be $1,112.74 per $1,000 principal amount of notes tendered by the consent deadline at 5 p.m. ET on June 15, which includes a consent payment of $30.00 per $1,000 of notes.

The total payment was calculated using a weighted average that assumes that 35% of the notes would be redeemed at a price equal to 110.25% of the principal amount of the notes to be redeemed under the equity claw provisions of the notes, and 65% of the notes would be redeemed at a make-whole redemption price, according to a company press release.

The tender offer will end at midnight ET on June 29.

Holders also will receive accrued interest up to but excluding the settlement date, which is expected to be July 2. Zayo said it may choose to settle early tendered notes before the offer expires.

Those who tender after the consent date will receive the base payment of $1,082.74 per $1,000 principal amount.

Zayo said it may retire any notes not tendered in the offer by redeeming the notes under the make-whole or equity claw provisions.

Adoption of the proposed amendments requires the consent of the holders of at least 75% of the outstanding principal amount of the notes.

Holders who tender their notes under the tender offer must also deliver consents. Tendered notes may be withdrawn, and related consents revoked, by 5 p.m. ET on June 15.

The tender offer and consent solicitation are conditioned on completion of the acquisition, the receipt of the required consents to adopt all of the proposed amendments and supplement the indenture, the execution and delivery of a supplemental indenture effecting the amendments and obtaining financing with enough proceeds, when combined with cash on hand, to fund the acquisition and offers.

Morgan Stanley & Co. LLC (800 624-1808 and collect 212 761-1057) is the dealer manager and solicitation agent. D.F. King & Co., Inc. (800 967-4607 or banks and brokerage firms call 212 269-5550) is the tender agent and information agent.

Zayo Group was expected to bring a $1.25 billion offering of high-yield notes to market during the June 11 week, Prospect News reported on June 4.

The bonds, backing the acquisition of AboveNet, are expected to come in two tranches: a $750 million tranche of senior secured notes and a $500 million tranche of senior unsecured notes.

Zayo is a Louisville, Colo.-based provider of fiber-based bandwidth infrastructure and network-neutral colocation and interconnection services. AboveNet is a White Plains, N.Y.-based provider of high bandwidth connectivity services for businesses and carriers.

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