New Rochelle, N.Y.-based 'vulture' fund Romulus Holdings Inc. is expected to
gain equity control of Galaxy Telecom L.P. once the Sikeston, Mo.-based MSO
files its prepackaged Chapter 11 bankruptcy report next month.
Last week, Galaxy said it has received approval from two-thirds of its
bondholders for a reorganization plan that will swap about $80 million of its
debt for equity in the company.
Galaxy has about 109,000 subscribers in 15 states, including Mississippi,
Nebraska, Kentucky and Illinois.
According to Galaxy chief financial officer Keith Davidson, bondholders will
get about 97 percent of Galaxy's stock. The remaining 3 percent will go to
current Galaxy investors, including the Gleason family, which founded the
company in 1979.
'[Bondholders] are the new guys on the block,' Davidson said.
Tom Gleason Sr. founded Galaxy in 1979 and served as its chairman until 1995,
when he was replaced by his son, Tom Jr.
According to Securities and Exchange Commission documents, Tom Jr. and his
brother, James Gleason -- Galaxy's president and chief operating officer --
owned 38.5 percent and 33.8 percent of Galaxy's stock, respectively.
Davidson added that it has not been determined what role, if any, the
Gleasons will have in the new company.
According to the deal, holders of about $80 million of Galaxy's $120 million
in high-yield debt have agreed to the plan. The remaining $40 million in debt
does not require interest payments.
Galaxy has defaulted on interest payments for its high-yield debt several
times in the past year.
Davidson said FleetBoston Financial Corp.'s Fleet Bank has also agreed to a
$25 million loan for Galaxy.
Davidson would not comment on which bondholders would end up with the bulk of
Galaxy stock. But sources close to the situation said Romulus will end up being
the largest equity holder.
'Romulus owns most of the debt,' one source familiar with the matter
said.
Romulus, according to sources, has been buying up Galaxy debt for months, as
well as bonds for Classic Communications Inc., another troubled rural MSO.
Romulus already owns a substantial interest in OpTel Inc., a Dallas-based
provider of cable and telephone service to multiple-dwelling units that emerged
from Chapter 11 in August. Romulus also owns a position in WSNet Inc., a
provider of business-to-business direct-to-home video programming based in
Austin, Texas.
Sources said Romulus -- along with another vulture fund, Cerberus Partners LP
-- plans to eventually combine its holdings in Galaxy, OpTel and Classic to
launch a direct-to-home satellite service.
Officials at Romulus did not return phone calls for
comment.
