Struggling James Cable Partners LP has cut a refinancing deal that should put the MSO back on firm footing.
On the ropes because it couldn't come up with the cash to pay bondholders, the 70,000-subscriber James Cable last week secured a $30 million credit facility that allows it to pay interest due on high-yield debt and fund upgrade plans.
In a press release, the Bloomfield Hills, Mich.-based MSO said it obtained the facility from affiliates of GoldenTree Asset Management to replace a 1997 credit agreement with Canadian International Bank of Commerce and Bank One Corp.
James Cable has already drawn down $18 million from the new facility to pay off certain bondholders-mainly GoldenTree-and to make interest outlays due Feb. 15 on its $100 million, 10.75 percent series-B senior notes. James said it will use the remaining $12 million to continue with its rebuild and upgrade programs and to fund acquisitions.
GoldenTree is a newcomer to the high-yield bond market. It launched a $750 million high-yield fund in October and also manages a $275 million hedge fund.
Headed by two high-yield bond industry veterans-chairman Leon Wagner, who had worked with junk-bond king Michael Milken at Drexel Burnham Lambert in the late 1980s, and Steven Tananbaum-GoldenTree is familiar with cable.
Aside from Tananbaum, who had several cable holdings in his nine years in charge of the high-yield segment at MacKay Shields, a fund-management unit of New York Life Insurance Co., the company also includes former CIBC Oppenheimer Corp. head of media and telecommunications high-yield research Steve Shapiro.
Rounding out GoldenTree's management team is Thomas Shandell, former senior managing director and analyst at Bear Stearns & Co. Inc. He covered gambling, hotels, restaurants and leisure.
James Cable had been under the gun to pay off the bond interest debt. Late last year, the company hired Communications Equity Associates to find a buyer for its systems, but has been unable to reach a deal.
In light of this new arrangement that may be a moot point, said the operator's chief financial officer.
"We're not for sale," James Cable CFO Daniel Shoemaker said. "The plan is to rebuild the systems, expand the high-speed data business and go from there."
James Cable systems are in Oklahoma, Texas, Georgia, Louisiana, Colorado, Wyoming, Tennessee, Alabama and Florida. The company is primarily owned by New York City investment bank Sandler Capital Management Inc.
Founder William James owns about 5 percent to 10 percent of the company and continues to run operations.
Shoemaker said James may even look to acquire additional systems, but added that the company would be highly selective.
"I wouldn't anticipate us doing a Mediacom-sized deal," he said in reference to Mediacom Communications Corp.'s $2.2 billion acquisition of 840,000 subscribers from AT & T Broadband earlier this month, "but maybe strategic operations that are adjacent to where we are now."
Shoemaker said the difficulty in reaching a deal wasn't due as much to James Cable's financial situation as the overall deal climate.
"There was not a whole lot of activity [last year]," Shoemaker said. "It was more of a general market condition."
Still, Shoemaker admits James Cable's systems are strictly in "small-town USA." Its nearest systems to metropolitan areas are between 60 and 70 miles away, not usually the most attractive locations for larger cable companies.
Although the company's owners are not likely to sell now, he added, that doesn't mean they won't in the future.
"I don't think the concept is to sell in the next 24 months," Shoemaker said.
UBS Warburg analyst Aryeh Bourkoff said the deal could make James Cable more attractive to potential suitors by removing the onus of the overdue interest debt and allowing the operator to fully fund its plant upgrade from 450 megahertz to 750-MHz systems with two-way capacity. The refinancing also should bring the company to free cash-flow positive status.
"The financing plan only works to improve the relative attractiveness of the company," he said. "This gets James Cable back on solid footing."
