May 4, 2010 3:37:22 PM EDT
Sorenson bonds plunge further, loans rebound after NECA rate cuts
Bonds and loans backing Sorenson Communications continue to be extremely volatile a day after plunging 20-40 points on news the National Exchange Carrier Association (NECA) cut reimbursement rates to providers of services to the hearing-impaired. The largest reductions were aimed at the biggest providers, which include Sorenson, and are expected to draw heavily on company earnings, given the fixed-cost nature of the businesses, sources said.
Sorenson term debt (L+250) has recovered to 90/91 this afternoon, from 85/88 at today's open and an 81 context yesterday. The loan had been quoted at 98.5/99.5 prior to the announcement.
The bonds bounced, too, but remain at severely distressed levels. Sorenson 10.5% first-lien notes due 2015 traded as low as 46, versus 65/75 markets yesterday and 97/98 before the news. Levels settled in the high 50s this afternoon. The 144A-for-life paper is a sizeable, $735 million issue that was allocated at 98.1 in January via Goldman Sachs and Morgan Stanley.
At time of issue, it was disclosed to potential investors that the reimbursement rates were regularly reviewed and could change on June 30, according to sources. Regardless, the unrated bond deal was received in market with terms at the middle of talk, and proceeds were earmarked to pay down second-lien term debt and a PIK holdco loan, as well as fund a dividend to the sponsor, GTCR Golder Rauner.
There was the issue. Opponents argued the transaction represented a transfer of wealth from the public – phone bill taxes fund the reimbursements – to the private equity firm via the planned equity distribution. And news that the GTCR-controlled firm was leveraging the company for a special payment was not well received in Washington, according to sources.
These types of firms are “not about making people rich,” but are “about providing a public service,” to citizens who are deaf and hearing-impaired, according to an analyst.
The payment formulas and funding estimates for the Interstate Telecommunications Relay Services (TRS) Fund from July 1, 2010 through June 30, 2011 was put up for review on April 30, according to FCC documents. Proposed compensation rates would apply to Speech-to-Speech Services (STS), Captioned Telephone Services (CTS), Internet Protocol (IP) CTS, IP Relay and Video Relay Services (VRS).
The Consumer and Governmental Affairs Bureau is seeking comments as to whether the Commission should adopt NECA’s rates for the 2010-11 period. Comments are due in mid-May, with reply comments due on May 21.
Sorenson Communications, which is controlled by GTCR Golder Rauner, provides video-relay services and equipment for the deaf and hard-of-hearing community. The sponsor took an initial interest in October 2005 and funded an initial dividend with proceeds from the PIK holdco loan in 2008. – Matt Fuller/Krista Giovacco
LCDD info: email@example.com
No content (including ratings, credit-related analyses and data, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of S&P. The Content shall not be used for any unlawful or unauthorized purposes. S&P, its affiliates, and any third party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions, regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an "as is" basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT'S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of the Content even if advised of the possibility of such damages.
Credit-related analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities or to make any investment decisions. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P's opinions and analyses do not address the suitability of any security. S&P does not act as a fiduciary or an investment advisor. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives.
S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.
S&P may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), and www.ratingsdirect.com and www.globalcreditportal.com (subscription), and may be distributed through other means, including via S&P publications and third party redistributors. Additional information about our ratings fees is available at www.standardandpoors.com/usratingsfees.