FiberTower holds exchange offer, solicits consents for 9% convertibles

By Angela McDaniels

Tacoma, Wash., Oct. 26 - FiberTower Corp. has begun an exchange offer and consent solicitation for its 9% convertible senior secured notes due 2012, according to a company news release.

For each $1,000 principal amount of convertibles tendered, holders will receive $1,000 principal amount of 9% mandatorily redeemable convertible senior secured notes due 2012.

The new convertibles will be mandatorily redeemable for cash, shares of FiberTower common stock and new 9% senior secured notes once certain conditions are met.

If all of the existing convertibles are exchanged and the new convertibles are mandatorily redeemed, FiberTower will pay a total of $14 million in cash, issue 336.7 million shares of common stock representing about 69% of outstanding shares on a fully diluted basis and issue $125 million principal amount of the new 9% notes. Shareholder approval will be needed in order to issue the additional shares.

The new 9% notes will mature six years after the mandatory redemption date. One-third of the interest on the new notes will be payable in cash, and two-thirds will be payable in kind. FiberTower said it will escrow the amount needed to pay the first six semiannual cash interest payments.

No payment will be made for accrued interest on the existing convertibles, but interest on the new 9% notes will begin accruing from the convertibles' last interest payment date.

The company is soliciting consents to amend the indenture governing the existing convertibles that will eliminate or amend substantially all of the restrictive covenants, modify some events of default and the related collateral agreements and provide that the liens securing the new convertibles and new notes will rank ahead of the liens securing the convertibles.

Holders who tender will be deemed to have consented to the proposed amendments.

The outstanding principal amount of notes is $278.5 million, and an additional $15.3 million principal amount will be issued on Nov. 16 as an interest payment.

The exchange offer will expire at 5 p.m. ET on Dec. 1.

The offer is conditioned on the delivery of consents from holders of more than half of the convertibles.

The company said that holders of approximately 50.1% of the outstanding principal amount of the convertibles have committed to participate in the exchange offer and consent solicitation.

Under the terms of the exchange offer, the company's board of directors will be reduced to seven members from nine members once the new convertibles are redeemed, and Crown Castle will continue to be a minority investor in FiberTower.

Crown Castle executive vice chairman John Kelly will be appointed as chairman of the FiberTower board. Phil Kelley, Crown Castle's senior vice president of corporate development, will remain a director. Kurt Van Wagenen, FiberTower's president and chief executive officer, and Steven D. Scheiwe, president of Ontrac Advisors, will also remain on the board.

Additionally, FiberTower and Crown Castle extended their master lease agreement for another five years, some portions of which will only be effective once the new convertibles are redeemed. The parties have also agreed to cooperate on the marketing of FiberTower's backhaul services at Crown Castle tower sites.

D.F. King & Co., Inc. (800 714-3313 or 212 269-5550) is the information agent for the exchange offer.

FiberTower is a San Francisco-based backhaul and access services provider focused on the wireless carrier market.

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