Knology Inc., parent company of overbuilder Knology Broadband Inc., has
agreed in principle with its noteholders on a restructuring plan to reduce the
telecommunications company's debt.
Knology said in a prepared statement that should it be unable to gain final
approval for the restructuring, executives will solicit votes for approval of a
prepackaged bankruptcy. If this occurs, it will only impact the broadband
subsidiary. The parent company and other subsidiaries, such as Interstate
Telephone Co., would not be debtors in such a proceeding.
If the restructuring is successful, however, the company said some current
stockholders have committed to invest $39 million in new equity in Knology.
The restructuring underlines the battering cable competitors continue to take
in the financial markets.
Other hard-pressed overbuilders have taken different tacks. Sacramento,
Calif.-based overbuilder Western Integrated Networks LLC declared bankruptcy.
Texas-based overbuilders Grande Communications Inc. and ClearSource Inc. merged
in order to cut costs and operate more efficiently. Other companies quietly went
away before installing a line.
Knology said its senior secured lenders -- Wachovia Corp. and CoBank -- have
agreed, pending restructuring, to modify their lending facilities. The
modifications will allow the borrowers under that facility to pay dividends to
Knology, which will provide additional capital.
The company said 100 percent of the old notes must be exchanged for the
restructuring to be effective. Even if it implements restructuring under
bankruptcy, the company anticipated that the broadband business would continue
to operate as usual, suppliers will be paid and employees retained, according to
a company statement.
Knology ended the first quarter with 256,653 connections from 425,197
marketable passings by the broadband division.
But despite growth, the company had a net loss of $27.8 million from
broadband last quarter on revenues of $32 million.