Koor leaves in Call-Net truce
Special shareholders meeting postponed until Tuesday
Michael Lewis
Financial Post
TORONTO - An interim truce was reached late yesterday between Sprint Canada Inc. parent Call-Net Enterprises Inc. and a New York investment banking firm that had mounted a campaign to gain control of the company and sell it, but chief executive Juri Koor didn't survive the battle.
Mr. Koor and Vince Salvati, the chief financial officer, were ousted by the Call-Net board in an 11th-hour attempt to dissuade shareholders at a special meeting yesterday from backing a hostile takeover bid from Crescendo Partners LP.
The special shareholders meeting was postponed to next Tuesday after the interim pact was reached and details were still being worked out last night.
Mr. Salvati said he and Mr. Koor stepped down at the behest of board chairman Lawrence Tapp and in the "interests of the company and its shareholders."
Kevin Bennis, Call-Net's current chief operating officer, will assume Mr. Koor's role, while a replacement for Mr. Salvati was not named.
The exit of Mr. Koor, along with a move by Crescendo to delay a deadline for a crucial prepayment waiver from Call-Net bondholders holding $2.2-billion in Call-Net senior debt, led to several delays in yesterday's meeting and finally its postponement.
Crescendo's new waiver deadline is Oct. 21 at noon, two days after Call-Net releases third-quarter financial results.
Analysts suggested the changes in senior management at the Toronto-based long-distance company were the key concessions needed to convince shareholders to reject the bid by the rebel shareholder group fronted by Crescendo Partners.
Mr. Tapp told shareholders yesterday that they should take the management changes into account before they cast their votes.
After the changes were announced, Mr. Salvati said they were needed to restore investor confidence. Crescendo wants to seize Call-Net, replace most of its board and executive team with its own slate and sell all or part of the company in an open auction.
It says Mr. Koor's management contributed to a 70% drop in the value of the company's shares over the past year.
But Crescendo needs a waiver from the bondholders or a change in the control provision or the debt covenant will kick in. That would require retirement of the debt plus a 1% premium within 40 days of the ownership change.
Eric Rosenfeld, a principal of Crescendo who attended the three-times delayed meeting, said the extension of the consent deadline will allow bondholders to view Call-Net's latest results, which he said will be disappointing.
Call-Net has already made a number of concessions to shareholders in order to win their support, including a commitment to sell non-core assets. It has also agreed to discussions with Burnaby, B.C.-based BCT.Telus Communications Inc., which may be interested in acquiring Call-Net or some of its assets. Talks with BCT.Telus have been put off until after the ownership struggle is resolved.
Crescendo, meanwhile, has now extended its deadline for bondholder consent for a fourth time, and has quadrupled its original inducement offer to 2% of every $1,000 in principal, with the payment potentially exceeding more than $50-million. Funds would be drawn from Call-Net reserves.
Call-Net, meanwhile, is attempting to fend off a takeover by Crescendo at the same time as it rolls out local calling services in major Canadian cities, including Toronto. |
