Zayo gets initial tenders, consents for 99% of $347 million 10¼% notes

By Susanna Moon

Chicago, June 18 - Zayo Group, LLC and Zayo Capital, Inc. said investors tendered $347 million principal amount, or about 99%, of their $350 million outstanding principal amount of 10¼% senior secured first-priority notes due 2017 as of the consent payment deadline at 5 p.m. ET on June 15.

Consents were delivered for more than 75% of the outstanding notes, which was enough to amend the notes to eliminate most of the restrictive covenants, eliminate events of default and release all the collateral securing the obligations under the notes, according to a press release.

As a result, Zayo executed a supplemental indenture, which will become operative when the tendered notes are purchased.

As previously noted, the tender offer is being made in connection with Zayo's acquisition of AboveNet, Inc.

The total purchase price will be $1,112.74 per $1,000 principal amount of notes tendered by the consent deadline. The total purchase price includes a consent payment of $30.00 per $1,000 of notes.

The tender offer will continue until midnight ET on June 29. Tendered notes may no longer be withdrawn. The offer began June 4.

The total payment was calculated using a weighted average that assumes that 35% of the notes would be redeemed at a price equal to 110.25% of the principal amount of the notes to be redeemed under the equity claw provisions of the notes and 65% of the notes would be redeemed at a make-whole redemption price, according to a company press release.

Holders also will receive accrued interest up to but excluding the settlement date, which is expected to be July 2. Zayo said it may choose to settle early tendered notes before the offer expires.

Those who tender after the consent date will receive the base payment of $1,082.74 per $1,000 principal amount.

Zayo said it may retire any notes not tendered in the offer by redeeming the notes under the make-whole or equity claw provisions.

Holders who tender their notes under the tender offer must also deliver consents.

The tender offer and consent solicitation are conditioned on completion of the acquisition, the receipt of the required consents to adopt all of the proposed amendments and supplement the indenture, the execution and delivery of a supplemental indenture effecting the amendments and obtaining financing with enough proceeds, when combined with cash on hand, to fund the acquisition and offers.

Zayo came to market June 14 with a solidly oversubscribed, well received $1.25 billion two-part junk bond offering, as previously reported by Prospect News. The company priced $750 million of 7.5-year senior secured notes at par to yield 8 1/8% and $500 million of eight-year senior unsecured notes at par to yield 10 1/8%.

Morgan Stanley & Co. LLC (800 624-1808 and collect 212 761-1057) is the dealer manager and solicitation agent. D.F. King & Co., Inc. (800 967-4607 or banks and brokerage firms call 212 269-5550) is the tender agent and information agent.

Zayo is a Louisville, Colo.-based provider of fiber-based bandwidth infrastructure and network-neutral colocation and interconnection services. AboveNet is a White Plains, N.Y.-based provider of high bandwidth connectivity services for businesses and carriers.

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