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 Chanin Capital Partners acted as financial advisor to the Ad-Hoc Committee of Unsecured Creditors (the "Noteholders") of American Cellular Corporation ("ACC"), one of the largest rural and suburban providers of wireless communications services.
As a result of a competitive market and an overleveraged balance sheet, ACC violated bank covenants and faced liquidity issues. ACC was unable to service its debt and was forced to pursue a restructuring.
Chanin was retained by the Noteholders in September 2002 to facilitate a restructuring solution for the $700 million of 9 1/2% Senior Subordinated Notes due 2009 ("Notes"). Negotiations led to an exchange offer that would exchange the Notes for a combination of cash, preferred stock and equity in Dobson Communications (then a 50% joint venture owner of ACC). The exchange offer was launched in July 2003 and was completed in August 2003 with a 97.4% tender rate. Through this exchange, ACC was merged into Dobson as a wholly-owned subsidiary.
ACC was prepared to file for a pre-packaged bankruptcy in the event that the exchange offer did not meet minimum acceptance thresholds. In addition, Chanin successfully obtained lock-ups from over 66% of the Noteholders to support the deal. The lock-up was a necessary step to ensure a successful exchange process due to the complex nature of a stapled pre-pack.
Highlights of the transaction include:
- Noteholders sold 100% of the equity in ACC for:
- $50 million in cash;
- $125 million of Dobson convertible preferred stock ($8.75 strike price); and 33.3% of Dobson pro forma equity (45.1 million new Dobson shares).
- ACC was merged into Dobson, creating the ninth largest national wireless service provider.
- As part of the restructuring, ACC issued $900 million of new senior notes to fully refinance its existing bank debt. These new senior notes were held in escrow until the exchange offer was completed and bank approval was received.
- Bondholders received an implied recovery of 69.9% on their Notes, a 408.4% increase from the trading price of 13.8 on the day of Chanin's engagement (September 17, 2002).
- Nine days after closing of deal, stock closed at $8.95 for an implied recovery of 83.0%, a 503.6% increase from the trading price of 13.8.
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