Alestra sets closing of expired offer for notes

New York, Nov. 17 - Alestra S de RL de CV (Ca/D) that it set the closing of its previously announced and now-expired exchange offers, cash tender offers and consent solicitations for its 12 1/8% senior notes due 2006 and its 12 5/8% senior notes due 2009 for Nov. 17, designating it as the settlement date.

As previously announced, Alestra, a San Pedro Garza Garcia, Mexico telecommunications company, said on Aug. 21 that it would offer either $1,060 principal amount of new senior notes due June 30, 2010, $550 in cash or a combination for each $1,000 principal amount of its outstanding senior notes due 2006 and 2009. It also said that it would solicit noteholder consents for a prepackaged U.S. Chapter 11 filing

(Alestra had launched an unsuccessful exchange offer in February under which holders would have received $970 principal amount of new senior step-up notes due May 15, 2008 and an early consent payment of $30 principal amount of those new notes or a cash payment of $400 and an early consent payment of $30 per $1,000 principal amount of the 2006 notes; the senior step-up notes due May 2008 would have paid cash interest of 5% until May 15, 2006 and 7% thereafter. Holders would have received $970 principal amount of new senior step-up notes due February 15, 2011 and an early consent payment of $30 principal amount of those new notes or a cash payment of $400 and a cash tender offer early consent payment of $30 per $1,000 principal amount of the 2009 notes; the senior step-up notes due February 2011 would have paid cash interest of 5% until August 2006 and 8% thereafter. The offer was terminated on June 20, at which point just $144 million (53% ) of the 2006 notes and $95 million (32% ) of the 2009 notes had been tendered and not withdrawn, after Alestra began negotiations with a group of noteholders who said that they would not support or participate in the first offers, causing Alestra to launch its second offer in August).

Alestra said it was making the [August] exchange offer to address its financial problems.

"We believe that the completion of the restructuring, whether through the offers or the U.S. prepackaged plan, is critical to resolving our liquidity crisis and ensuring our continued viability," the company said in a filing with the Securities and Exchange Commission.

Alestra made interest payments on the notes from issuance in 1999 through May 15, 2002 using the $194 million of proceeds placed in escrow.

It has not made any subsequent interest payments and the escrow is exhausted. The notes require annual debt service of $74.3 million.

"We do not expect cash flows from our operations to be sufficient to make upcoming interest payments on the existing notes unless we receive additional funding from an outside source," Alestra added.

The company said the interest rate of the new notes would be 8% if the participation in the offers were more than 90% - later amended to 85% - but less than 95%, and 9% if the participation in the offers were 95% or more.

Tendering holders would not receive any accrued and unpaid interest on those notes.

The new notes will accrue interest from June 30, 2003. The notes will also have fixed principal amortization beginning on December 30, 2005.

Alestra said that up to $392 million of the new notes could be issued. The cash portion will be financed by a $100 million capital contribution from Alestra's equity holders, 51% coming from Onexa and 49% from AT&T plus an additional $8.5 million payment by AT&T and cash generated from operations.

Alestra said it was also seeking consents to a prepackaged bankruptcy filing, which the company said it could make if it had sufficient consents but did not reach the levels required for the exchange to be completed.

On Oct. 22, Alestra extended the expiration deadline for the tender offer, exchange offer and solicitation of consents for a prepackaged U.S. Chapter 11 filing to 11:59 p.m. on Nov. 4 - the last of several such extensions - and said it was granting withdrawal rights up to but not including Nov. 4 to holders who had previously tendered or who would subsequently tender. It also amended the offer to reduce the amount of notes that had to be tendered to 85% from 90% previously, and said the consent solicitation would no longer result in the removal of the limitation on liens section.

The company additionally filed a new prospectus with the Securities and Exchange Commission making additional disclosures, following legal action brought by noteholder W.R.H. Global Securities Pooled Trust ("Huff") in the United States District Court for the Southern District of New York.

Alestra said a hearing had been held on Oct. 15 to 17 on Huff's motion for an order preliminarily enjoining the offers. During the hearing, Alestra agreed to make additional disclosures. Because of this, the court denied Huff's motion as moot, Alestra said, adding that the remaining relief sought by Huff was denied, including Huff's request for an injunction pending appeal.

On Nov. 5, Alestra said that the tender offer, exchange offer and consent solicitation expired as scheduled at 11:59 p.m. ET on Nov. 4, without further extension.

As of that deadline, $232.92 million principal amount of Alestra's outstanding 12 1/8% notes and $254.2 million of its 12 5/8% had been tendered in the offers, which in the aggregate represent 85.5% of the existing senior notes. Since the offers were conditioned upon receipt of valid tenders representing at least 85% in aggregate of the existing senior notes, the company said that its minimum tender condition had been satisfied.

Alestra said that the offers remain subject to the various conditions described in its prospectus dated Aug. 21, as supplemented, and said the settlement of the offers will occur as soon as practicable if those conditions are satisfied. It said that further information will follow in the near future.

On Nov. 6, Alestra announced the proration of its tender offer.

It said that some $487 million aggregate principal amount of Alestra's outstanding 12 1/8% notes and 12 5/8% notes was tendered in the offers. Of that amount, about $481 million was tendered for the new-notes option under the offers, and around $6 million was tendered for the cash-payment option under the offers. Accordingly, if the offers are consummated, the new-notes option will be prorated, and holders of the existing notes who tendered in the offers and chose the new- notes option would be entitled to receive $221.83 in cash and $632.47 principal amount, before rounding, of Alestra's new 8% senior notes due 2010 per $1,000 principal amount of existing notes tendered and accepted for exchange for each $1,000 principal amount of existing notes tendered.

The company said that if the offers were to be consummated, holders of existing notes who tendered in the offers and chose the cash-payment option would be entitled to receive $550 in cash per $1,000 principal amount of existing notes tendered.

Alestra said the new notes would be issued only in denominations and integral multiples of $1,000. If a holder tendered a principal amount of the existing notes in the exchange offers that would normally result in the holder receiving a fractional interest in the new notes, then the principal amount of the new notes that the holder would receive if the offers are consummated would be rounded up to the nearest $1,000 if the fractional interest in the new notes would be greater than or equal to $500 and rounded down to the nearest $1,000 if the fractional interest in the new notes would be less than $500.

The dealer manager for the offer was Morgan Stanley (Simon Morgan at 212 761-2219 or Heather Hammond at 212 761-1893). The information agent was D.F. King (212 269-5550).

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