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ITC^DeltaCom shareholder objects to planned recapitalization
By Lisa Kerner
Charlotte, N.C., June 18 - One of ITC^DeltaCom, Inc.'s largest shareholders, H Partners Capital, demanded ITC's board "immediately cease and desist from any further actions to pursue or consummate the recapitalization" announced on June 11.
The shareholder beneficially owns 1.2 million shares, or 6.4%, of the company's outstanding stock. H Partners objected to the recapitalization in a letter to ITC's board included as part of a schedule 13D filing with the Securities and Exchange Commission.
ITC said it intends to get a new $315 million credit facility consisting of a $10 million revolver, a $230 million first-lien term loan and a $75 million second-lien term loan, according to a company news release.
"The rationale for the recapitalization is unclear. There is no impending liquidity crisis. In fact, the company's latest 10-Q shows an improved financial performance," the letter stated.
"Even if there was a legitimate rationale for the recapitalization, a refinancing does not justify stock sales to insiders and other parties at highly discounted prices."
According to H Partners, the recapitalization would give the company's controlling shareholder, Welsh Carson, millions of shares of common stock for $3 per share, a greater than 50% discount to the pre-recapitalization market price of $7 per share.
H Partners said while it is willing to assist ITC in realizing a recapitalization on more favorable terms, the investor will "exercise its legal rights in connection with the recapitalization against the board, Welsh Carson, and all other parties participating in the recapitalization."
ITC^DeltaCom is a Huntsville, Ala., provider of integrated communications services.
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