Bondholders OK Galaxy Plan

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Investor Gary Singer's quest to create an 800,000-subscriber cable and direct-to-home satellite operation moved forward last week, after his investment company agreed to a plan to take equity control of Galaxy Telecom Inc.

Singer's investment vehicle — Romulus Holdings Inc., a New Rochelle, N.Y.-based fund that specializes in investing in distressed companies — was a Galaxy bondholder that agreed to accept a deal to exchange its debt for Galaxy equity. Sources called Romulus one of Galaxy's largest bondholders.

On Sept. 20, Galaxy said it had reached an agreement with two-thirds of its bondholders to accept a prepackaged Chapter 11 plan that would include exchanging debt for equity.

Galaxy chief financial officer Keith Davidson said bondholders, which represent about $80 million of Galaxy's $120 million in high-yield debt, would get 97 percent of Galaxy's equity. The remaining 3 percent would go to current investors, including the Gleason family, which founded Galaxy in 1979.

"[Bondholders] are the new guys on the block," Davidson said.

Tom Gleason founded Galaxy in 1979 and served as chairman until 1995, when his son Tom Jr. took over. According to securities filings, Tom Jr. and his brother James Gleason — Galaxy's president and COO — owned 38.5 percent and 33.8 percent of Galaxy's stock, respectively.

Davidson said it had not been determined what role, if any, the Gleasons would have in the new company.

Davidson also said FleetBoston Financial Corp.'s Fleet Bank agreed to lend Galaxy $25 million.

Davidson would not comment on which bondholders would end up with the bulk of Galaxy stock. But sources said Romulus would be the largest equity holder.

"Romulus owns most of the debt," said one source familiar with the matter.

Romulus, according to sources, has been buying up Galaxy debt for months at depressed prices. It had also been buying bonds from Classic Communications Inc., a troubled rural MSO with about 377,000 subscribers.

Romulus owns a substantial stake in OpTel Inc., a Dallas-based provider of cable and telephone service to multiple dwelling units that emerged from Chapter 11 reorganization in August. OpTel has about 335,000 customers in 11 major urban areas, including Chicago, San Francisco, Houston and Dallas.

Romulus also owns a position in WSNet Inc., a business-to-business direct-to-home video provider based in Austin, Texas.

Sources say Romulus — along with another distressed-company fund, Cerberus Partners Inc. — plans to eventually combine its holdings in Galaxy, OpTel and Classic to launch a direct-to-home satellite service.

Officials at Romulus and Cerberus did not return phone calls for comment.

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