Following in the financial restructuring footsteps of fellow Sprint PCS affiliates, AirGate PCS Inc. said it intends to pursue a registered exchange offer for all of its outstanding $300 million aggregate principal amount 13.5-percent senior subordinated discount notes due 2009 for $160 million aggregate principal amount of new 9.38-percent senior subordinated notes due 2009 and new shares of AirGate common stock representing approximately 56 percent of the company’s outstanding equity.
AirGate’s management added that to facilitate the exchange offer, it has reached an agreement with its lenders to amend its senior secured credit facility, eliminating the minimum subscriber covenant. If approved, the exchange offer and recapitalization plan are expected to save the carrier more than $250 million.
The recapitalization plan also calls for the transfer of AirGate’s holdings in its iPCS Inc. subsidiary to a liquidating trust subject to approval from iPCS’ bankruptcy court. It also calls for a reverse stock split of AirGate’s common stock; an increase in shares available under AirGate’s stock incentive plan; an increase in the size of AirGate’s board of directors to at least seven members, three of whom are to be approved by supporting old noteholders; and a consent solicitation to remove substantially all covenants of the indenture under which the old notes were issued that can be removed without consent of all old noteholders, release the liens created under the old notes indenture and waive any defaults under the old notes indenture that occur as a result of the recapitalization plan.
“The recapitalization plan represents a critical long-term solution for improving AirGate’s capital structure and reducing the financial risk in our business plan by providing over $255 million in debt service savings through 2009,” said Thomas Dougherty, president and chief executive officer of AirGate.
AirGate noted that the exchange offer and recapitalization plan require the valid tender of 98 percent of the old notes, the approval of AirGate’s shareholders, additional changes to its credit facility required by the supporting noteholders, legal approvals and other closing conditions.
If the company does not receive the needed tender offers, it said it could pursue a prepackaged plan of reorganization and is soliciting consents of holders of old notes for such a plan.
Sprint PCS affiliate Alamosa Holdings Inc. announced a similar recapitalization plan last week following a successful offering by UbiquiTel Inc. earlier this year.
