|[February 01, 2013]
Otelco Announces Restructuring Transaction
ONEONTA, Ala. --(Business Wire)--
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 (News - Alert) 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 (News - Alert) 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 Cour 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
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.
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