Otelco, a wireline telecommunications provider in Alabama, Maine, Massachusetts, Missouri, New Hampshire, Vermont and West Virginia, refinanced its long-term debt and completed its strategic alternatives review and results for its third quarter ended September 30, 2017.
Highlights of Otelco’s new long-term debt agreement led by CoBank as administrative agent include:
- Five-year term loan of $87 million that replaces Otelco’s previous senior and subordinated term loans, the principal amounts of which had been reduced by $13.3 million since February 2016
- Current interest rate of LIBOR plus an applicable margin (currently 4.50%), with reductions in the applicable margin as leverage declines, providing significant savings relative to Otelco’s previous debt facilities
- $5 million undrawn revolving loan
- Quarterly principal repayment of approximately $1.1 million
- Potential to expand the term loan by an additional $20 million
- No prepayment penalties
The new facility reduces the effective interest rate on the company’s debt by more than 400 basis points and supports Otelco’s continued focus on reducing leverage. The lower interest rate is expected to reduce cash interest expense in 2018 by more than $3.5 million compared with the former facilities. The new credit facility allows the company, subject to being in compliance with certain covenants, to pay dividends to its shareholders and redeem stock beginning in 2018.
“We’re pleased to have successfully closed this refinancing with Otelco and look forward to a continuing strong partnership with them as their primary lender and financial services provider,” said Kevin Oliver, CoBank lead relationship manager and managing director of the bank’s Communications Banking Division.