Wednesday, August 15, 2012

More Consolidation

I wrote about a couple of mergers/acquisitions yesterday.

Birch, which scooped up a bankrupt AstroTel in Sarasota, FL, grabbed a neighboring CLEC called Daystar. Apparently, Birch is trying to make some headway in the VZ and C-Tel region on the west coast of Florida. Or they were buying a small bump of revenue and assets. No idea, but Birch re-financed its debt to get some extra cash for this acquisition.

"The new $90 million facility consists of a $40 million senior term loan, a senior revolving credit facility with a $35 million capacity, and a $15 million tranche of subordinated debt. Additionally, the Senior Credit Facility contains an "accordion" feature which gives Birch the option to increase the Senior Credit Facility by $20 million." [PR Newswire] That means they paid less than $20M for Daystar. My guess is way less.

Carl Icahn owns over 90% of XO. Another of his holding companies, High River Limited Partners, an Icahn Associates affiliate, made a bid for Broadview Networks offering $165 million in cash equity and $10 million in loans in exchange for 70% of new stock. Broadview has had a bad year. "To facilitate this [finance restructuring] process, it plans to reorganize through a prepackaged Chapter 11 bankruptcy filing," according to a release in July of 2012. MCG Capital was an investor in Broadview, which had to write down $160M out of $189M investment. Short term debt came due faster than they could pay it back - and the markets are not kind now for CLEC debt. One of those debt holders is High River Limited Partnership, the holder of approximately $51 million of Broadview's senior secured notes due September 1, 2012 - and Icahn is opposing the re-org. Just what Broadview needs: a fight while it tried to re-org and swim in this telecom ocean.

Think Grid, a cloud services and comm company, was scooped up by COLT. This is a UK acquisition, but it shows that traditional carriers are still buying cloud. By buying instead of building they get skill set, revenue, infrastructure, processes, and in this case an Agent Channel.

Can't buy? Then white-label. The key is to get in the market sooner rather than later.

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