ONEONTA, AL,
Feb. 1, 2013 /CNW/ - Otelco Inc.
(NASDAQ: OTT; TSX: OTT.un), a wireline telecommunication
services provider in Alabama,
Maine, Massachusetts, Missouri, New Hampshire, Vermont and West
Virginia, today announced a restructuring transaction, which
will strengthen the Company by deleveraging its balance sheet and
reducing its overall indebtedness by approximately $135 million. Otelco has reached an
agreement with its senior lenders to amend and extend the terms of
its current senior financing through April
2016. In addition, our IDS units will be cancelled and
the existing senior subordinated debt will be converted into
equity. The vast bulk of our subordinated debt is held in the
IDS units, and, as such, our IDS unit holders will continue to be
significant shareholders of the Company as they are today.
These efforts will better position the Company to compete in the
21st century telecommunications marketplace, solve the
near-term maturity of the Company's senior secured financing, and
significantly reduce the Company's debt burden. The Company
currently has over $32 million in
cash and sufficient liquidity to consummate this transaction.
In April 2012,
Otelco announced the loss of a material contract to provide
services to Time Warner Cable (TWC). The Time Warner contract
expired on December 31, 2012 and TWC
elected to begin performing services in-house rather than renewing
the contract with Otelco. In addition to the loss of the TWC
contract, recent rulings by the FCC will also continue to
negatively impact the Company's revenues. After consulting
with advisors, the Board of Directors and senior management have
concluded that reducing the Company's debt and improving its
capital structure will be best implemented through a "pre-packaged"
chapter 11 filing, which has the support of the Company's senior
lenders.
Before making its chapter 11 filing, Otelco will
seek the support of holders of record on February 8, 2013, of its senior subordinated
notes (including notes held in the form of IDSs) for the proposed
plan through a solicitation process that will occur in February,
2013. The voting process will take approximately 35
days. After that period, Otelco intends to voluntarily file
its reorganization plan with the U.S. Bankruptcy Court in
Delaware.
The chapter 11 process is designed to allow a
company to continue its operations both during and after the
filing. Thus, neither the solicitation nor the actual filing
is expected to impact Otelco's day-to-day operations. Otelco
will continue to provide its customers with the quality services
they have come to expect. "This filing will have no impact on
our operations," stated Michael
Weaver, CEO of Otelco. "Our offices are open, all our
employees are working and we're still providing excellent service
to all our customers. We hope to be in chapter 11 for a brief
period of time. We have significant liquidity and it's
business as usual for us." In addition, Otelco is, and
intends to remain, current with all of its vendors.
"Our proposed plan, with the extension of the
existing senior credit facility, will reduce total debt, simplify
our capital structure and strengthen our balance sheet. I am
confident that this restructuring represents the best possible
outcome for the Company and our IDS unit holders, and I highly
encourage the IDS holders to support it with a 'yes' vote during
the solicitation," continued Weaver.
The Company will hold a conference call to
discuss the planned chapter 11 filing with investors on
Friday, February 1, 2013, at
1:00 p.m. (Eastern Time). To
listen to the call, participants should dial 719-325-4858
approximately 10 minutes prior to the start of the call. A
telephonic replay will be available from 3:00 p.m. (Eastern Time) on February 1, 2013 through midnight on March 31, 2013 by dialing (719) 457-0820 and
entering Confirmation Code 3741326. The live broadcast of
Otelco's conference call will be available online at
www.OtelcoInc.com on February 1,
2013, beginning at 1:00 p.m. (Eastern
Time). The online replay will be available at approximately
3:00 p.m. (Eastern Time) and continue
for 60 days. A transcript of the call will also be available
on the Company's website on Monday, February
4, 2013 by the close of business.
FORWARD LOOKING STATEMENTS
Statements in this press release that are not
statements of historical or current fact constitute forward-looking
statements. Such forward-looking statements involve known and
unknown risks, uncertainties, and other unknown factors that could
impact the Company's restructuring plans or cause the actual
results of the Company to be materially different from the
historical results or from any future results expressed or implied
by such forward-looking statements. In addition to statements
which explicitly describe such risks and uncertainties, readers are
urged to consider statements labeled with the terms "believes,"
"belief," "expects," "intends," "anticipates," "plans," or similar
terms to be uncertain and forward-looking. There can be
no assurance that the restructuring transaction described herein
will be consummated. The forward-looking statements contained
herein are also subject generally to other risks and uncertainties
that are described from time to time in the Company's filings with
the Securities and Exchange Commission.
ABOUT OTELCO
Otelco Inc. provides wireline telecommunications
services in Alabama, Maine, Massachusetts, Missouri, New
Hampshire, Vermont and
West Virginia. The Company's
services include local and long distance telephone, network access,
transport, digital high-speed data lines and dial-up internet
access, cable television and other telephone related services. With
approximately 99,000 voice and data access lines, which are
collectively referred to as access line equivalents, Otelco is
among the top 25 largest local exchange carriers in the United States based on number of access
lines. Otelco operates ten incumbent telephone companies serving
rural markets, or rural local exchange carriers. It also provides
competitive retail and wholesale communications services through
several subsidiaries. For more information, visit the Company's
website at www.OtelcoInc.com.
SOURCE Otelco Inc.