Consolidated Communications talks term B-2 at Libor plus 300-325 bps

By Sara Rosenberg

New York, Dec. 12 – Consolidated Communications Inc. launched on Monday its $935 million incremental seven-year senior secured term loan B-2 with price talk of Libor plus 300 basis points to 325 bps with a 1% Libor floor and an original issue discount of 99 to 99.5, according to a market source.

The term loan B-2 has 101 soft call protection for six months and amortization of 1% per annum, the source said.

Also, the loan has a ticking fee starting on day 31 of the full spread plus the greater of the 1% Libor floor and three month adjusted Libor.

Covenants include a 5.25 times total leverage ratio and a 2.25 times interest coverage ratio.

Morgan Stanley Senior Funding Inc., MUFG, TD Securities (USA) LLC and Mizuho Bank Ltd. are the lead banks on the deal.

Commitments are due on Dec. 19, the source added.

The new loan is being obtained in connection with the acquisition of FairPoint Communications Inc., under which FairPoint shareholders will receive a fixed exchange ratio of 0.73 shares of Consolidated Communications common stock for each share of FairPoint common stock. The all-stock merger transaction is valued at about $1.5 billion, including debt.

Proceeds from the incremental term loan B-2 and cash on hand, or other sources of liquidity, will be used to refinance FairPoint debt and pay fees and expenses associated with the transaction.

As of Sept. 30, FairPoint had net debt of around $887 million.

Pro forma for the transaction, the combined net debt of the combined company will be about $2.3 billion, which represents 3.8 times net leverage as of Sept. 30, compared to Consolidated Communications’ 4.4 times net leverage as of Sept. 30.

After closing, Consolidated Communications’ shareholders will own about 71.3% of the pro forma combined company and FairPoint’s shareholders will own 28.7%.

On a pro forma basis, the combined company generated more than $1.5 billion of revenue and $566 million of adjusted EBITDA before synergies, or $621 million after synergies, for the 12 months ended Sept. 30.

Closing is expected by mid-2017, subject to federal and state regulatory approvals, the approval of both companies’ shareholders and other customary conditions.

Consolidated Communications is a Mattoon, Ill.-based broadband and business communications provider. FairPoint is a Charlotte, N.C.-based provider of data, voice and video technologies.

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