ITC Delta^Com's term loan traded at 95 after the company received an amendment from its lenders to restructure $260 million of debt. The integrated communications services provider is deferring scheduled amortization on the debt and has obtained a $20 million subordinated secured term loan from Welsh, Carson, Anderson & Stowe, the company's majority shareholder. This will mature after the credit facilities have been repaid and will pay PIK interest of 12% per year.
According to a 10-K, negative operating trends have adversely affected liquidity. "We determined it was necessary to undertake a restructuring in order for us to meet our short-term debt service requirements and other cash needs." The existing lenders required the new loan as a condition of the restructuring, the 10-K states. Richard Fish, ITC's chief administrative officer, and Lee Kimball, v.p. of marketing did not return calls.
Last January, ITC's bank debt tumbled into the low 80s from the mid-90s. With the amendment, interest rates payable on the senior and junior credit facilities will be increased by 2.5% annually. All $22 million of obligations under the company's capital leases have been replaced with loans under the credit facility and financial covenants have been loosened. The first scheduled principal payment under the company's $55.7 million junior credit facility has been deferred by a year until Sept. 30 2007. The maturity has been extended a year until June 2009.
The company will still be required though on June 30, 2006 to repay $204 million of outstanding borrowings under its senior credit facility and from September 30, 2007 through June 30, 2009 to repay an increasing amount of its $55.7 million under its junior credit facility. The bank debt is led by Wells Fargo Bank and carries a spread of LIBOR plus 5 1/4%. Other lenders that signed an amendment in the fall include Bank of America, GE Capital, Sankaty Advisors and GoldenTree Asset Management (LMW 1/23).