Searchlight to invest USD 425 mln into Consolidated Communications

Update: 14 September 2020 | 14:31 CET

Investment firm Searchlight Capital Partners has agreed to hoist its stake in Consolidated Communications to 35 percent for a total of USD 425 million. The deal has been approved by the board of directors of Consolidated, which will use the money to accelerate fibre deployment and to reduce debt. 

Specifically, the company will reduce net debt by USD 325 million and refinance its remaining USD 2 billion worth of outstanding debt, extending maturities and lifting liquidity. With the deal, Consolidated expects to reduce its net leverage ratio to 3.5x, upon the receipt of the full investment from Searchlight. In general, the company said the investment will serve as the foundation of a multi-year reinvestment initiative that will let it provide quality services and customers experiences while returning to revenue growth. 

Two-stage investment

Under the agreement between Consolidated and Searchlight, the USD 425 million investment commitment will come in two stages. At the closing of the first stage, Searchlight will invest USD 350 million in exchange for the right to receive an unsecured subordinated note worth USD 395 million, plus 8 percent of common Consolidated shares. The investor will also get the a contingent payment right (CPR) convertible, upon the receipt of certain regulatory and shareholder approvals, into an additional 16.9 percent of common shares. 

The second stage will come upon receipt of FCC and Hart Scott Rodino approvals and other customary conditions. Searchlight will then invest an additional USS 75 million and receive a note convertible into shares. The CPR will at this time also be convertible into additional shares of common stock, representing 10.1 percent of the company’s stock. This second stage should complete in the middle of next year. 

After completion of the first stage, Consolidated will nominate Searchlight advisor David Fuller to its board. Searchlight will after phase two nominate a second director.

Consolidated also said it is planning an offering of USD 1 billion worth of senior secured notes due 2028. The money raised will go towards redeeming all outstanding 6.50 percent senior notes due 2022 and to paying back some debt under its existing credit facility.