Vonage extends financing talks

By Ritsuko Ando

NEW YORK (Reuters) - Internet-based phone company Vonage Holdings Corp (VG.N) failed last week to seal a crucial $215 million private debt financing deal, and had to again extend the deadline for exclusive negotiations with a private financier.

Vonage has been negotiating with the unidentified financier to finalize the deal, which is needed to refinance $253 million in convertible debt redeemable in mid-December. The deadline for a deal had already been extended to June 23 from June 13.

"Given the current credit market, due diligence can take time. So it's been extended for some more time," said a Vonage spokesman by phone. He declined to specify the new deadline.

Vonage has said the financier has already signed a nonbinding letter of intent to provide the funding, and the company's chairman, Jeffrey Citron, told Reuters in early May that he expected a formal commitment in the second quarter.

The company said it expected two-thirds of the financing to come from a senior secured credit facility and one-third through the issuance of convertible secured notes. However, it has warned that terms could change and that there was no assurance that a deal will close.

Vonage was a pioneer in selling Web-based phone services to consumers looking for a cheaper alternative to traditional landline services.

But it has been bleeding red ink since its start, and has faced growing competition from Skype, a unit of online auction company eBay Inc (EBAY.O), and cable service providers' voice services.

Vonage shares fell 3 to $1.75 by late morning trade on the New York Stock Exchange. They have steadily fallen since their May 2006 IPO price of $17 amid worries about the company's business model.

Investor concerns have shifted from the company's heavy losses to slower subscriber growth as a result of its efforts to rein in marketing spending.

(Reporting by Ritsuko Ando; editing by John Wallace)