Alestra emerges from debt restructuring, shareholders inject US$108mn

Mexican long distance operator Alestra on Monday finished restructuring debts for US$570mn in a process that also saw its two shareholders inject US$108.5mn into the company, Alestra said in a statement. "The conclusion of this process, which took Alestra more than 18 months, today places it in a substantially more robust position having reduced its level of indebtedness by US$200mn, which in turn has significantly reduced its financing costs," according to the company. Creditors representing 85.5% of the senior notes due in 2006 and 2009 accepted the offer to restructure the US$570mn of debts by the November 3 deadline, just squeezing past the minimum limit of 85% needed to move forwards with the deal. The two shareholders, AT&T (NYSE: T), which owns 49%, and Onexa, which owns 51%, paid in a total of US$108.5mn, of which US$100mn was through the issue of new shares, Alestra said. "[Alestra] will continue to have a lot of debt on its balance sheet, but a little more comfortable in terms of amount, terms and cost," said Manuel Guerena, telecoms analyst at credit rating agency Standard & Poor's. AT&T's willingness to inject fresh funds into Alestra could indicate is commitment to Mexico's telecoms industry, after it cut financing earlier this year to another regional subsidiary, AT&T Latin America (ATTL). Mexico's largest phone company Telmex (NYSE: TMX) bought up substantially all of ATTL's assets in an October bankruptcy auction. But Guerena expressed skepticism that AT&T has long-term plans for Mexico, saying the US long distance operator could be positioning Alestra to make it a more attractive, saleable asset. On the operating side, management willl likely continue pushing data services, where it had started to focus before the financial troubles began, Guerena said. "The typical services for multinational companies are [very competitive] and fighting for them represent low margins, while smaller companies and retail Internet are higher margin services," he said. An Alestra spokesperson said the company would continue with its strategy of providing long distance, Internet and data, and local services. According to Guerena, Alestra should be able to reach profitability and might try and take advantage of the financial difficulties of bankrupt competitor Avantel to grow its business. "[Alestra] will be well behind Telmex, but should be a profitable business," he said.