Choice One Communications' bank debt has been crawling up toward the 40 range since the company reported stronger financial results for the second quarter. A $10 million piece of the bank debt traded around the 39 level last week and about $30-40 million is believed to have changed hands in the 36-39 range two weeks ago. Prior to the recent activity, traders said the paper traded in the 32 context about a month ago.
Although the bank debt has improved over the last month, Choice One is still at risk for an in-court restructuring, according to Standard & Poor's. "With accessible liquidity of about $12.6 million and weak free cash flow prospects, this competitive local exchange carrier is at risk of filing for bankruptcy in the very near term in the absence of additional new capital," notes S&P in a recent review of the telecommunications industry. Choice One has very limited liquidity and a huge amount of debt relative to operating cash flow, said Michael Tsao, an S&P analyst. Moreover, the company is not free cash flow positive so it will continue to burn through cash, he added.
Choice One has a $125 million "A" term loan, a $125 million "B" piece, $43.284 million on its "C" tranche, $2.625 million on its "D" loan and $100 million outstanding on its revolver. The company is an integrated communications provider offering facilities-based voice and data telecommunications services. Ajay Sabherwal, Choice One's executive v.p. and cfo, did not return calls.