News

Cerberus-Backed Galaxy Cable Arises

3/31/2002 7:00 PM Eastern

Six months after it filed a prepackaged Chapter 11 bankruptcy, Galaxy Telecom L.P. has emerged with a new name, a new set of owners and a new management team.

Gone are the company's founders — president and CEO Tom Gleason Jr. and his brother, chief operating officer James Gleason — and in their place is a management team hand-picked by Galaxy's new majority shareholders, Cerberus Partners L.P.

Also gone is the name Galaxy Telecom, after that company filed for Chapter 11 protection in September. The company emerged from bankruptcy on March 22 as Galaxy Cable Inc, according to a press release.

Galaxy's properties — which have about 100,000 subscribers in several rural systems in 12 states — are now managed by Anchor Pacific Corp., an Austin, Texas-based firm that specializes in distressed cable properties.

Earlier this year, Anchor said it would manage OpTel Inc., another cable operator that emerged from bankruptcy protection.

OpTel, which mainly offered cable and high-speed-data service to about 150,000 multiple dwelling units in 15 major markets across the U.S., was renamed TV Max.

Anchor Pacific CEO Ron Dorchester, a 29-year cable-industry veteran, will run both Galaxy and TV Max.

Dorchester, one of the founders of Prime Cable, started out as a general manager with American Television & Communications Corp. (ATC) — the predecessor to Time Warner Cable — in 1973. Prime sold its largest system, in Las Vegas, to Cox Communications Inc. in 1998, for about $3.1 billion.

PRIMED FOR DIGITAL

Joining Dorchester on the Galaxy operating team are former Prime Cable executive William Chain and former Galaxy Telecom vice president Larry Eby.

Galaxy will focus on rolling out digital service — via WSNet Inc. technology — in several markets this year, said Dorchester. The company has already rolled out digital in a small South Carolina system with a few hundred subscribers, and was encouraged by its success, he said.

"The customers loved it," said Dorchester, adding that about 97 percent of those subscribers took the digital package.

The management team is currently working out a digital plan that will be submitted to Galaxy's board of directors this month, Dorchester said.

"We're looking at all of the systems with an eye toward their candidacy for the digital rollout," Dorchester said. "I would think that by the end of April we would have come to a conclusion and have a plan."

Galaxy's emergence from bankruptcy marks the end of the Gleason family's association with the company they founded in 1979.

According to a Securities and Exchange Commission filing on March 18, the Gleasons had been running Galaxy through a management partnership, Galaxy Systems Management Inc. That agreement was to be terminated after the deal was closed, the SEC document said.

Dorchester said the Gleasons are still involved in the video industry, through their other holdings — Galaxy America, a reseller of DirecTV Inc. direct broadcast satellite service; Galaxy Telecom II; and Wescom, which has a few thousand cable subscribers.

According to the SEC document, more than 50 percent of Galaxy's equity is owned by Cerberus International Ltd. and Cerberus Partners, both New York City investment firms that specialize in distressed companies.

Cerberus Partners, along with New Rochelle, N.Y.-based Romulus Holdings Inc., had been rumored to be buying up Galaxy debt at bargain prices last year.

According to the SEC document, Cerberus was a major holder of Galaxy debt, which it swapped in exchange for equity in the company.

ROMULUS ON SCENE

Although the document did not list any Galaxy shareholders aside from Cerberus, Dorchester said that Romulus is a stakeholder in Galaxy Cable.

"They [Romulus] have and had a piece of the deal," Dorchester said.

In addition to swapping its old debt for equity, Galaxy also issued about $40 million in new bonds to help finance operations, said Dorchester. In addition, Fleet Bank, a past lender to Galaxy Telecom, also agreed to issue a loan to the new entity. Dorchester declined to reveal the size of the Fleet loan.

However, Galaxy has sufficient financing for its "current and foreseeable needs," he added.

Dorchester said it is unlikely that Galaxy would be combined with TV Max, because of the differences in their operations.

"TV Max is a big-city operator in MDUs, and Galaxy is clearly a suburban and rural operator," Dorchester said. "These are vastly different businesses."

September