Splitrock Obtains Consent From Bondholders
Added: (Wed Nov 24 1999)
Pressbox (Press Release) -
Provides Favorable Accounting Treatment for Equipment Financing
THE WOODLANDS, Texas--(BUSINESS WIRE)--Nov. 24, 1999--Splitrock Services Inc. (Nasdaq:SPLT - news) today announced that it has achieved the requisite consents needed to close the consent solicitation that it commenced on November 9, 1999, to a proposed amendment to the indenture governing the company's 11 3/4% Senior Notes due 2008.
The amendment has two immediately positive benefits for Splitrock. First, Splitrock is now allowed to structure its recently announced financing of $122 million in equipment purchases from Nortel Networks as a capital lease. The company believes that the accounting treatment for capital leases is more favorable than the alternative operating lease structure due to the ability to capitalize the purchases as assets and depreciate them under the capital lease. An operating lease would require the company to record the lease costs as operating expenses that would reduce reported EBITDA, or earnings before interest, taxes, depreciation and amortization. The equipment purchases from Nortel Networks relate to Splitrock's major ongoing expansion of its nationwide network to handle current and expected increases in customer traffic.
Second, the amendment allows Splitrock to go from financing 80 percent of the value of the assets purchased to 100 percent. This change is beneficial to the company by allowing it to take greater advantage of attractive financing terms on capital expenditures it will purchase to support its growth.
Splitrock also announced that it increased the consent payment it will make to holders of the Notes from $5.00 to $8.00 per $1,000 principal amount of notes. Although the Notes are not currently rated, the company has stated its intention to seek ratings during the first half of 2000.
Questions regarding the solicitation should be directed to Chase Securities Inc., the solicitation agent, at 212/270-1100. The Consent Solicitation Statement and related documents can be obtained by contacting Georgeson Shareholder Communications Inc., the information agent, at 212/440-9800.
Headquartered near Houston, Texas, Splitrock owns and operates a nationwide broadband access platform that places ATM switches in hundreds of points of presence (POPs) providing ubiquitous coverage of U.S. businesses and households. Splitrock's 'carry anything, anywhere' business strategy is implemented on this
ATM-to-the-Edge(TM)'' access platform, which integrates data, video and voice traffic on one platform. Because of the unified nature of the network platform, Splitrock offers the same level and quality of service nationwide. Splitrock's products and services include dial and dedicated Internet access, VPN and Virtual Internet Service (VIS) to corporate end users, ISPs, and other telecommunications carriers. For more information, visit the company's web site at http://www.splitrock.net.
This press release contains forward-looking statements that involve a number of risks and uncertainties. Among the important factors that could cause actual results to differ materially from those indicated by the forward-looking statements are substantial capital requirements; intense competition; changes in technology; changes in regulatory policy; and general economic conditions.
Additional information concerning these and other important factors can be found in the periodic reports and registration statements filed by Splitrock with the Securities and Exchange Commission.