Broadwing has amended its $1.8 billion credit line, completing a critical element of its recapitalization plan and providing the telecom-service company with the liquidity necessary to meet obligations until 2006. Broadwing amended the credit led by Bank of America and Salomon Smith Barney primarily to extend debt maturities. The renegotiated deal came at a cost though--an increase in pricing and a $220 million reduction in loan size. "We have what we need now," said Tom Osha, chief of staff at Broadwing. "Without the amendment we would have run into a liquidity issue late in the fourth quarter of this year."
Osha explained that Broadwing needed to push out the maturity on its revolver--initially set to expire in 2004--to 2007. To get the job done, he added, "We brought a little bit [more] pricing to the table." The amended facility now carries a spread of 51/2% over LIBOR, about 60 basis points up from the previous deal. Broadwing also needed the amendment to close on a $350 million commitment in junior capital that it had from Goldman Sachs. Osha said the proceeds will pay down the $220 million on its permanently reduced bank facility and the remainder of the funding will be applied to the revolver. He noted that the pay-down on the revolver is not permanent but will create more availability in the piece.
Osha said the changes "fully removed any financial overhang." The reworked credit consists of a $765 million revolver and a $569 million term loan "A" both set to expire in March 2007, a $339 million "B" piece due in March 2008 and a $151 million "C" piece that matures in March 2009. Broadwing launched a five-point restructuring plan last October in order to strengthen its financial position and reduce its debt. Commenting on what remains to be done, Osha said, "We will continue to focus our effort to deleverage the company and to maximize the core assets of Cincinnati Bell." He added that in the next four to six months Broadwing would also complete an exchange offer and close the sale of its broadband unit.