re: MPOW - Senior secured 13% notes due 2004
This is some DD on the notes MPOW just redeemed...
Ok, tried to dig up some of the covenants and indentures that govern the notes that Mpower just retired. Obviously they have restricted the flexbility to pursue strategic alternatives, because they would not have been redeemed otherwise. To start with, the Plan of Reorganization provided the first clue. Somewhat puzzled, I found out that the 2004 Noteholders came of out Ch. 11 unimpeded - their claims was taken over by the newly reorganized company fully. Hmmmm... That was a surprise to me. This meant, Mr. Huff and the 2010 noteholders and Preferred Stock holders didn't even have to ask the 2004 Noteholders wrt. reorganization matters. Good start.
Then I tried to find the rules governing the 2004 Notes. They can be found here - In Oktober 1997 Mpower excanged previous notes due 2004 for the current notes. The only difference was I assume (didn't verify) that the notes exchanged for are TRADING on an OTC market. If indeed so, good strategy because that let's the company buy back debt if trading at distressed levels: sec.gov
Let's turn to the provisions of the 2004 notes:
OPTIONAL REDEMPTION........ The Notes may be redeemed at the option of the Company, in whole or in part, on or after October 1, 2001, at a premium declining to par in 2003,
plus accrued and unpaid interest and Liquidated Damages, if any, through the redemption date....
>>> Well the remaining notes (after the repurchase) were redeemed recently at the 2002 designated rate .. 103.25%
COVENANTS.................. The indenture pursuant to which the Exchange Notes will be issued (the "Indenture") contains certain covenants that, among other things, limit the ability of the Company and its Restricted Subsidiaries to make certain restricted payments, incur additional indebtedness and issue preferred stock, pay dividends or make other distributions, repurchase equity interests or subordinated indebtedness, acquire an aggregate of more than 20 switches until Consolidated EBITDA (as defined) is
positive for each of two consecutive quarters (with certain exceptions), engage in sale and leaseback transactions, create certain liens, enter into certain transactions with affiliates, sell assets of the Company or its Restricted Subsidiaries, conduct certain lines of business, issue or sell equity interests of the Company's Restricted Subsidiaries or enter into certain mergers and consolidations. In addition, under certain circumstances, the Company will be required to offer to purchase the Notes at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase, with the proceeds of certain
asset sales. See "Description of the Exchange Notes--Certain Covenants."
CERTAIN COVENANTS (cited, abbreviated)
- no dividend payments on common stock
- no common stock repurcahse
- no new debt issuance
- no new preferred stock issuance ("Disqualified stock")
- no sale & leaseback transactions
- no sale of subisidiaries
- no liens
- no mergers
- no Affiliates Transacions (I guess that means those Special Vehicles to use with securitizations)
- no business other than telecommunications (means also no liquidation !)
- puts a limit on ownership of 20 Switches until EBTIDA is positive for 2 consecutive quarters
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
My comments:
well that opens up a whole lot of possibilities. The 20-switch ceiling until EBTIDA profitable, the limits on liens and sale & lease-back transactions, share repurchases, mergers with other telecom firms and preferred stock issance are the most uneasy requirments any company would like to shake off as soon as it could..
For me this probably means acquisitions of cheap distressed telco assets plus sale & leaseback financing - or it could mean a merger is imminent..
best rgrds
CROSSY |
