December 7, 2010 / 10:33 PM / 9 years ago

UPDATE 2-One Comm buyers to submit bids Tuesday -- sources

* One Comm buyers reduced to a handful

* EarthLink and Paetec could be among top two

* Risk deal may not materialize (Updates with quote, background)

By Nadia Damouni

NEW YORK, Dec 7 (Reuters) - EarthLink ELNK.O is one of the few remaining companies likely to make an offer to buy privately held One Communications Corp, as a deadline for bids arrives on Tuesday, said four people close to the deal.

If a sale occurs, the price could range anywhere near $500 million to $1 billion said the sources. Deals in the sector have been completed at around five times earnings before interest, tax, depreciation and amortization, they added.

The sources requested anonymity as they are not authorized to speak on behalf of the companies.

One Comm, a regional provider of telephone and Internet services that claims to be the largest private regional telecommunications company in the United States, put itself up for sale in September.

The company had sought to drastically cut its debt as it risked breaching debt covenants, according to Standard & Poor’s. One Comm has a $560 million senior secured term loan, of which $449.5 million is outstanding, and a $30 million revolving credit facility, according to the ratings agency.

The company had a cash balance of about $17 million as of March 31, 2010.

Still, the likelihood of a deal remains uncertain. The process has been described as “soft” in which prospective buyers were approached by Blackstone Advisory Group, One Comm’s advisor, but only a handful expressed interest, the sources said.

“A buyer for One Comm will need to be comfortable with the company’s weakening performance,” said one source.

The other possible buyer is Paetec Holding Corp PAET.O, which provides voice and data services to businesses, said one source.

One Comm and EarthLink declined to comment. A Paetec spokesman was not immediately available for comment.

In July, One Comm’s credit rating was downgraded to ‘CCC+’ from ‘B-‘by Standard & Poors Ratings Services, reflecting concerns about the company’s ability to meet near-term financial covenants.

That month, One Comm announced the sale of its FiberNet business to NTELOS Holdings Corp NTLS.O for net proceeds of $149 million. And in August, Fibertech, in which One Comm has a minority interest, announced its pending sale.

The company said both transactions are expected to close in the fourth quarter and proceeds will be used to reduce its debt. (Editing by Kenneth Li and Andre Grenon)

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