With a drastically fluctuating economy, plummeting stock prices, and somewhat concerned partners, carriers’ behavior ranges from tightly zipped lips to fully exposed hands.
PAETEC (PAET) chairman and CEO, Arunas Chesonis, recently issued a letter to agents to answer questions, address rumors and assuage partner fears. “I know some prospects and customers have raised questions about PAETEC’s future, especially given what’s happened to our stock price,” read the letter. PAETEC's stock continued to struggle in the third quarter. The CLEC's shares consistently have fallen below $1, which puts it in danger of being delisted from the Nasdaq. At press time on Nov. 3, PAETEC stock was trading at 90 cents per share. The 52-week range fluctuated between 76 cents and $13.06.
Despite the falling price, Chesonis’ letter assured partners that PAETEC has generated positive cash flow for 22 consecutive quarters. It also said PAETEC had refinanced its bank debt in 2007 and was required to only pay $2 million per quarter until February 2013. Furthermore, PAETEC is “not required to repay any of the principal outstanding under [its] bonds until July 2015, having only semi-annual interest payments to make until then.
“We are well within the requirements of our bank debt and bond covenants,” said the letter. “These obligations represent substantially all of our long-term debt.”
Similarly, Buddy Miller, vice chairman at Level 3 Communications (LVLT), shared a healthy outlook on debt. He said that although many companies rely on commercial paper with short-term obligations — a market that has “dried up” in the recent credit crunch — Level 3 didn’t have any such debt, and, therefore, wasn’t affected. “Our debt has been in terms of either bank loans or bonds with a fixed termination date. ... The nearest-term ones are in 2009 and 2010,” explained Miller. “But credit lines, per se, we don’t rely on, so they don’t affect us.” Miller said that by almost every operating measure, Level 3 is in a stronger position than any time in its history. The numbers, though, might contradict that assertion. At press time, Level 3’s stock prices continued to hover just above the dollar mark, trading at $1.30. Moreover, a glance at the company’s balance sheet as of Sept. 30 showed $6.44 billion in long-term debt on $582 million in cash. Total current assets amounted to $1.13 billion, while total current liabilities came to $1.14 billion.
