Vonage has announced the successful completion of its planned refinancing. According to the company, the new $200 million, five-year term loan facility provides Vonage with "a more efficient capital structure" and is the result of the its solid financial and operating performance highlighted by EBITDA and free cash flow generation of $150 million over the past twelve months.
The company completed the refinancing on December 14, 2010, replacing its first, second and third lien debt totaling $194 million which carried interest rates ranging from 16% to 20%. The new lower cost facility will be accretive to 2011 net income by approximately 45% and will reduce interest expense by $20 million from 2010 (assuming constant LIBOR).
According to Vonage, the new loan bears interest at LIBOR plus 8%, with a LIBOR floor of 1.75%, and carries far less restrictive covenants than those under the prior facility, providing the company with "enhanced operating and financial flexibility to invest for future growth and value creation." The new facility is pre-payable at par, allowing the company to retire debt with cash from operations at any time.
Total interest expense savings from the Vonage’s recapitalization efforts throughout the year, which include prepayment at par of $41 million in debt, totals $116 million if the loans were outstanding to maturity. Vonage exits the refinancing with a clean balance sheet, low leverage of 1.5 times debt to last twelve months EBITDA and more than $70 million in cash.
"Today’s announcement of our successful refinancing begins a new and exciting chapter in Vonage’s history," said Marc Lefar, Vonage’s Chief Executive Officer.
"This transforming event, combined with our strong cash flow and the stabilization of our customer base, provides a very strong platform on which to continue to build the future of Vonage," he added.
Vonage also said that upon completion of the refinancing, all third lien notes were converted into 8.3 million shares of the company’s common stock. The remaining charges associated with the retirement of the first, second and third lien debt, totaling approximately $60 million, will be recorded in the fourth quarter.
Banc of America Securities LLC acted as lead arranger and bookrunning manager for the term loan Facility. Deutsche Bank Securities Inc. and Citigroup Global Markets Inc. acted as co-arrangers for the term loan facility.