Apparently there’s quite a window in the credit markets right now – at least for fiber operators. Earlier this week we heard about Integra’s refinancing package, and today Zayo made a similar move.
They refinanced their $1.6B term loan facility to cut another $12M in annual interest expenses, while also expanded the size of their undrawn revolver back up to $250M and lowering its interest rate as well. They also managed to increase the total leverage incurrence test from 5x to 5.25xEBITDA and removed the senior secured and total leverage maintenance covenants entirely.
Interestingly, it has only been a few months since the last time Zayo refinanced its balance sheet. In October they cut the rate on their term loan facility to LIBOR+4% with a minimum of 1.25%, and after today’s move it is LIBOR+3.5% with a minimum of 1.0%.
All of which is just Zayo putting its house further in order in the wake of last year’s huge M&A moves, the biggest of which was AboveNet. And of course they’re always getting the balance sheet ready for the next deal. You know one will happen sooner or later — though I don’t think anything is particularly imminent.
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Categories: Financials · Metro fiber
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OK so here goes a shot at Level 3 in comparison to Zayo and others. Public perception is that Sunit Patel is The Telecom Genius and mastermind at financial maneuvers and has done extroadinary work with Level 3. Well seems as though Zayo, Integra, Windstream, Sprint etc etc all seem to find creative financial moves and money when required yet there CFO are not placed in startosphere that Sunit is. In fact I would say the granular level of detail and the open book provided by Zayo indicates perhaps a better fundamental understanding of there business and how to make money then Level 3. Level 3 is vague , implies things with innuendos about growth forecast etc and that is frustrating.
Maybe anyone can refinance debt and make financial manuevers if they have the millions it takes a hire a large wallstreet firm to manage the deal.
The Open disclosure by zayo should be the model demanded by public, not just enough info to be legal and never stating difinitively anything atht you cant spin in teh future which is Sunit/Level 3 way.
The perfect game plan would be – Zayo calls Berkshire Hatahaway and asks Warren to load his elephant gun and aim for becoming Zayo’s largest private investor. Then Dan and Warren call STT, SEAM, and Fairfax to do a deal for all of their LVLT shares.
The great telecom snowball roll up: Berkshire Hathaway buys Zayo, then Zayo buys Level (3) Communications that has all those carry forward net operating losses (NOL’s) that make the deal so sweet.
Everybody is happy – says Walter Scott and CarlK 😉
Why do people on this board think that WEB would invest one penny in this sector? It’s probably the last investment on earth he would make.
That actually seems kind of plausible. Would there be regulatory issues?
My first reaction– “Here we go again”.
The credit markets are hot right now, but I didn’t realize they were this hot. L+ 350 at 4+ leverage with no maintence cash flow covenants!! Are we going back to the era of covenant lite?
Good on Zayo for getting these terms, but as an investor I might avoid credit products for the next year or so– when bankers get glassy eyed it’s time to leave. it always ends in tears because shit gets financed.
As for Buffet getting involved in a leveraged telecom rollup- that thought is just stupid which is why CarlK sponsors it.
Buffett told us he’s still looking for another big acquisition and has the cash to pay for one. “I’m ready for another elephant. Please, if you see any walking by, just call me.”
Dan – Zayo: Please call Warren!
Help take Level 3 private.
I don’t think it will happen any time soon either. Next quarter will show a glimpse but only time will tell.
My money is on an acquisition of EU networks