| March 25
March 25 Otelco Inc filed for Chapter 11
bankruptcy on Sunday, court documents showed, three months after
the telecom services provider lost a key revenue-generating
contract from Time Warner Cable Inc.
In February, Otelco reached an agreement with its senior
lenders to amend and extend the terms of its current senior
financing to reduce the company's debt and improve its capital
Otelco said at that time the debt restructuring would best
be implemented through a "prepackaged" Chapter 11 filing, which
had the support of the company's senior lenders. In a
prepackaged bankruptcy, management negotiates the general terms
of a bankruptcy plan with major creditors prior to the filing.
The company said last April that Time Warner Cable would not
renew a wholesale voice contract which accounted for 12.3
percent of Otelco's total revenue of $74.5 million for the nine
months to Sept. 30, 2012. The contract expired on Dec. 31.
Otelco's revenue potential was also hit by a Federal
Communications Commission (FCC) order in late 2011 that lowered
certain access rates by changing the way telecom carriers are
compensated for exchanging traffic, the company said in Sunday's
The company estimated its annual EBITDA (earnings before
interest, tax, depreciation and amortization) would fall to a
range of $28 million to $32 million in 2014, from $40 million to
$50 million in prior years, due mainly to those developments.
"As a result, it is no longer feasible for the company to
service over $250 million of debt," Otelco said in the filing.
The company said it agreed with its senior secured lenders
on a plan that would reduce its long-term debt from a current
balance of about $271 million as of Sept. 30, 2012, to "no more
than $142 million."
Following the restructuring, which is subject to court
approval, holders of subordinated notes will hold about 92.5
percent of the total equity interests in reorganized Otelco,
according to the filing.
The company's stock closed at $1.62 Friday on the Nasdaq.
Otelco offers telephone, Internet, broadband and television
services in Maine, New Hampshire and other areas.
The case is Otelco Inc et al, Case No. 13-10593, U.S.
Bankruptcy Court, District of Delaware.