Allegiance Telecom softened last week from the 62-64 context to the 58-60 range after the company reported a consolidated EBITDA loss of more than $15 million for the fourth quarter of 2002. No trades could be confirmed. Levels for the company's bank debt have been climbing out of the 30s since December. But for bank debt to support the levels in the high 50s and low 60s, there has to be some kind of restructuring plan in the works, noted one dealer.
At the end of last year, Allegiance received an amendment to its credit agreement and the company started to focus more on free cash flow rather than revenue growth. The new amendment also requires the company to reduce its level of debt to $660 million by April. 30. The Dallas-based company had a $350 million revolver and a $150 million "A" term loan before a recent $15 million pay down.
During the company's recent earnings call, Royce Holland, chairman and ceo, addressed investor concerns and rumors concerning whether or not the company would meet its deadline. While he noted that the company is working toward a plan that would be "fair and appropriate" to all of its stakeholders, reducing the debt is not completely in the company's control. If the company's management and stakeholders cannot find a solution by April 30, Allegiance will be in default under its credit agreement. Holland confronted speculation that under a default scenario bank debt holders would the prevent the company from making its bond payment due in mid May. Although this scenario could lead to bankruptcy, Holland said he did not think that a bankruptcy would be in the best interests of its creditors. Thomas Lord, Allegiance cfo, could not be reached by press time.