Primus Purchases $386 Million of Its High Yield Debt Securities

📅 August 3, 2001 - Primus Telecommunications Group, Incorporated (primusnet.com) a global facilities-based total service provider, today announced that it has purchased in the open market $386 million principal amount of its high yield debt for $88 million in cash, in order to attain financial self-sustainability.

The $386 million principal amount of debt purchased by Primus had annualinterest payments of $44 million, and represents $316 million in futureinterest savings (assuming the bonds were held to maturity).
The foregoing purchases, together with the $62 million in principal amountof high yield securities purchases announced on January 17, 2001, havereduced the outstanding principal amount of Primus's high yield debt to $421million, which represents 48% of the total high yield debt issued by Primus.On January 17, 2001, Primus also announced that it had extinguished $166million in principal amount of its 5.75% Convertible Debentures due 2007through a combination of open market purchases and a common stock exchangetransaction, which leaves 45% of that issue outstanding.
After giving effect to all the debt repurchases and exchange transactionsover the last eight months, Primus has been able to reduce high yield andconvertible debt principal obligations by $614 million (from $1,170 millionto $556 million) and annual interest obligations from $118 million to $61million, and represents $413 million in future interest savings.
"We have taken a calculated and, we believe, necessary second step in ourdebt reduction program to strengthen significantly our balance sheet," saidK. Paul Singh, Chairman and CEO of Primus. "This represents a major advancetowards our goal to attain financial self-sustainability."
"Late last year, when it became apparent that the public capital marketswould be foreclosed to emerging telecommunications companies for anindefinite period, we determined that it was necessary to develop a strategyto become financially self-sustaining based on our own resources," hecontinued.
Singh believes that Primus is uniquely positioned due to the fact that thecompany's voice and data networks are already deployed, its operations hadbeen EBITDA positive for the prior two years, and its annual revenue runsrate in excess of $1 billion. Although the company owes $1.3 billion indebt, Sing believes this is relatively "manageable" compared to the debtloads of other emerging carriers, as Primus has more than $500 million inassets that would serve as collateral for senior financing.
In a statement, Singh announced a three-prong strategy to attain "financialself-sustainability:
Accelerate EBITDA growth from our existing revenue base by reducingSG&A significantly through a combination of improving productivity andstreamlining operations by shedding low-margin and non-core businesses; Strengthen our balance sheet by significantly reducing debt; and Seek to raise additional financing, as permitted under our bondindentures, primarily through offering existing unencumbered assets (over$500 million of accounts receivable and net property, plant and equipment)as collateral for senior secured financing, as well as from vendors,strategic partners and other sources."
He said that Primus has been able to lower its debt to $800 million from the$1.3 billion level last fall, and will continue to reduce debt further. Thecompany will also try to generate additional EBITDA by improvingproductivity and streamlining operations, the nature of which is yet to beannounced.