Insight Communications Co. said last week it would refinance all of the outstanding debt of its Ohio operating subsidiary — Coaxial Communications — and make a related $30-million payment to Coaxial's former owners.
In a press release, Insight said it would refinance the entire debt load of the Ohio system — $140 million in 10% senior notes due 2006, $55.9 million of 12 7/8% senior discount notes due 2008, and a $22.5 million senior credit facility — through the refinancing of a $900 million term loan with a new $1.125 billion term loan.
But by refinancing the debt, Insight triggered a put option held by the three former owners of Coaxial — two Florida businessmen, Barry Silverstein and Dennis McGillicuddy, and Columbus businessman D. Stevens McVoy co-founded the MSO in 1968 — for about $30 million.
Insight purchased 75% of Coaxial, which operates a system in Columbus, Ohio with about 88,000 subscribers, in 1998. In August 2000, Insight bought the remaining 25% interest in Coaxial for $2.6 million in cash and 800,000 shares of its common stock.
However, as part of that agreement, Insight agreed to pay the Silverstein, McGillicuddy and McVoy the difference between $32.6 million and the value of the 800,000 shares of Insight stock if the senior note or the senior discount notes were repaid or significantly modified.
That payment, said UBS Warburg cable debt and equity analyst Aryeh Bourkoff, was mainly for tax purposes.
"The simplification of the capital structure is a positive in the company is preparing for a more competitive environment," he added. "Complex capital structures with high leverage are no longer appropriate."
Insight expects to close the deals in the current quarter.