NewsDesk
KPNQwest, the leading pan-European data communications and hosting company, today announced that it has completed the acquisition of the Ebone and Central Europe businesses of Global TeleSystems, Inc and Global TeleSystems Europe B.V. (collectively “GTS”), pursuant to a share purchase agreement between GTS, GTS European Telecommunications Corp. and KPNQwest. As part of the acquisition, KPNQwest has issued approximately EUR 211 million of 10% convertible bonds due 2012 to former GTS bondholders and assumed an approximate EUR 435 million of net bank debt and capital lease obligations.
The acquisition consolidates KPNQwest’s position as the leading IP data communications provider in Europe. The new combined company will operate a 25,000-kilometre network with connection to 60 major European cities. In addition, 14 Metropolitan Area Networks (MANs) will be in service. The capital and operating synergies estimated at over EUR 600 million, uniquely derived from the combination of these two companies, are expected to exceed the purchase price in just 4 years.
Summary of Senior Credit Facility
To facilitate this transaction, KPNQwest has secured a new senior credit facility of EUR 525 million with a consortium of financial institutions. With the new senior credit facility, the company believes that the newly combined entity is fully funded for all of its capital and operating cash needs.
Of the EUR 525 million, EUR 50m may be used to purchase Nortel equipment, EUR 225 million will be used to refinance the existing GTS debt and the remainder will be available for general corporate purposes. The interest rate is calculated at a spread of 3.50% over interbank rates (EURIBOR/LIBOR). The spread will ratchet down to 1.50% with decreasing leverage. The current applicable rate has been set at 6.88%. The senior credit facility requires that the combined company meet certain financial covenants that will be tested on a quarterly basis.