Comcast Might Aid Bresnan Buy10/20/2002 8:00 PM Eastern
Bresnan Communications Inc. president Bill Bresnan, pressed to find additional financing for his proposed purchase of 320,000 rural-market subscribers from AT&T Broadband, might finally get it from an unusual source — Comcast Corp.
At issue is about $150 million, or about 15 percent of the total deal, including the money needed for upgrades.
In April, Bresnan agreed to buy AT&T systems in rural parts of Montana, Wyoming and Colorado for $735 million in cash. Bresnan also committed to spend $300 million over three years to upgrade the properties.
Bresnan had already locked up funding for the deal from private-equity firm Providence Equity Partners Inc. and Toronto-Dominion Capital, the private-equity arm of Toronto-Dominion Bank. Sources familiar with the deal said the private-equity portion is probably in the $250 million range.
Bresnan also has received a commitment letter from at least one bank — Toronto-Dominion.
According to sources, Comcast — which is in the process of merging with AT&T Broadband — might step up and provide the financing for Bresnan.
A deal with the Philadelphia-based MSO would ease a major burden for Bresnan, which had to hold up the Broadband systems acquisition after a proposed high-yield offering fell through. According to people familiar with the matter, Bresnan has been beating on doors at banks and financing companies to raise the needed $150 million, but to no avail.
Bresnan originally intended to close the purchase in September, and later extended that date to year's end.
Now, people familiar with the situation said the deal will likely close after the AT&T Broadband-Comcast merger is completed.
Bresnan could not be reached for comment. Comcast officials declined comment.
According to sources familiar with the matter, Comcast might be open to providing financing, either through a loan or a combination loan-and-equity purchase.
"In all likelihood it will be a mix-and-match deal," said one source familiar with the matter.
Bresnan also is negotiating with Comcast to reduce the cash portion of the deal, although sources familiar with the matter said any reduction would be minimal.
"They [Bresnan] would like to find a way to adjust some element of the cash portion of the deal," said the source familiar with the matter. "But it would not be by much."
Bresnan's difficulties underscore the problems operators of all kinds are finding in the banking market.
Though banks were once one of the prime backers for cable deals, they've become increasingly reluctant to lend to the industry in light of the economic downturn and the recent accounting problems with some MSOs, particularly Adelphia Communications Corp.
One MSO source that asked not to be named likened the current banking climate to the early 1990s, when federal restrictions on highly-leveraged transactions (HLTs) hamstrung banks from participating in many big media deals.
"It's an incredibly tight credit market," the MSO source said. "I've been around this a long time and I haven't seen anything like this before. As you think back to the HLT era of the early 1990s, some deals were getting done. But this is almost like a total shutdown."
Bresnan tried for more than a year to win the AT&T systems, which have about 320,000 subscribers, beating out bids from Alaska cable and telephone-service provider General Communications Inc.
Although the systems are located in largely rural areas, they do include some fairly sizeable communities, including Bozeman, Helena and Billings, Mont.; Grand Junction, Colo.; and Cheyenne and Laramie, Wyo. Several of those communities are also located near universities, which Bresnan has been partial to serving.
Bresnan has also been assembling a management team to supplement the existing staff. Most of the hires, sources said, are in accounting, finance and human-resource positions.
At present, Bresnan Communications has about 30 employees, including the core team of executive vice president Daniel Bresnan; senior vice president of community development Patrick Bresnan; senior vice president and general counsel Robert Bresnan; executive vice president and CFO Jeffrey DeMond; senior vice president telephone and data services Leonard Higgins; senior vice president and controller Andrew Kober; senior vice president of engineering Gareth McIntosh; senior vice president of business development Terry St. Marie; and vice president of finance and investor relations Margot Bright.
Bresnan sold his Bresnan Communications Co. — which had about 690,000 subscribers — to Charter Communications Inc. in 2000 for about $3.1 billion in cash, stock and assumed debt.