Vonage Holdings readies Friday launch for $200 million term loan

By Sara Rosenberg

New York, Nov. 16 - Vonage Holdings Corp. is scheduled to hold a bank meeting on Friday at 10 a.m. ET at the Le Parker Meridien in New York to launch its proposed $200 million senior secured term loan (B2/BB-), according to a market source.

Bank of America and Deutsche Bank are the lead banks on the deal.

Proceeds from the term loan, along with cash on hand, will be used to refinance existing term loans totaling $194 million.

The company will exercise its right to retire the first-lien debt under the make-whole provisions of the credit agreement and retire the second-lien debt at a discount of more than 25% to the contractual make-whole amount.

As of Oct. 31, the principal amount of the first-lien loans was $99.5 million, accrued but unpaid interest was $3.9 million, and the required make-whole payment was $20.6 million. The principal amount of the second-lien loans was $89.7 million as of Aug. 30, plus a payment of $72.8 million.

Meanwhile, the company's third-lien notes will be converted into 8.3 million shares of its common stock. In addition, the third-lien noteholders will receive a cash payment of $2.2 million plus accrued interest of $1.1 million.

The company has previously said that pricing on the new term loan is expected to be less than half the blended rate of the current debt, and that it anticipates saving more than $20 million in interest costs per year.

In addition, the new term loan is expected to contain fewer restrictive covenants than the existing debt providing the company with greater flexibility to operate and grow its business.

Covenants under the new deal will include total leverage, interest costs and capital expenditures.

Also, the term loan is expected to be prepayable at par.

Following completion of the refinancing, the company expects total leverage at or below 1.5 times debt to EBITDA, net debt at around 1.1 times and liquidity of $55 million in cash.

Closing on the new loan is expected to occur prior to Dec. 31.

Vonage is a Holmdel, N.J.-based provider of communications services connecting individuals and social networks through broadband devices.

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