Noteholders Agree on Knology Restructuring7/21/2002 8:00 PM Eastern
Knology Inc., parent company of overbuilder Knology Broadband Inc., has agreed in principle with its noteholders on a restructuring plan to reduce the telecommunications company's debt.
If the telco can't gain final approval for the restructuring, executives will solicit votes for a pre-packaged bankruptcy, Knology said in a prepared statement issued last week. If that were to occur, it would only affect the broadband subsidiary.
The parent company and its other subsidiaries, such as Interstate Telephone Co., would not be debtors in such a proceeding.
Should the restructuring prove successful, though, some current stockholders have committed to invest $39 million in new equity in Knology, the company said.
Other hard-pressed overbuilders have employed different strategies. Sacramento, Calif.-based overbuilder Western Integrated Networks LLC declared bankruptcy. Texas-based overbuilders Grande Communications Inc. and ClearSource Inc. merged in order to cut costs and operate more efficiently. Other companies quietly went away before installing a line.
Knology's broadband division has $444.1 million in outstanding senior discount notes, due in 2007, including $64.2 million owned by another Knology subsidiary, Valley Telephone Co. These noteholders will tender their "old notes" as part of the restructuring.
Senior secured lenders Wachovia Corp. and CoBank have agreed to modify their lending facilities, pending restructuring, according to Knology officials.
Even if it implements restructuring under bankruptcy, the company anticipated that the broadband business would continue to operate as usual, that suppliers would be paid and that employees would be retained, according to a company statement.
The West Point, Ga.-based company ended the first quarter with 256,653 broadband subscribers in 425,197 homes.
Knology provides bundles of 200 video channels, telephone service and high-speed-data to customers in the Southeast.
Despite the growth, the company has been hemorrhaging money. Last quarter, it reported $32 million in revenue, but a net loss of $27.8 million in its broadband business.