ICG CEO resigns after debt repaid

Randall Curran, CEO of resurrected carrier ICG Communications for the past three years, is resigning, the company revealed in SEC filings yesterday.

“The board feels this is the final stage in the restructuring, and Randy’s role is complete, so they asked him to resign,” said an ICG spokeswoman.

Curran was hired in September 2000—two months before the company declared bankruptcy—to turn the company around financially. Curran greatly reduced the workforce (as recently as this spring, when he announced another 20% staff cut), pulled out of 13 regional markets (ICG was in 40) and cut back money-losing operations such as DSL and VOIP.

ICG emerged from bankruptcy in October 2002, but a spokeswoman said the final indication of Curran’s successful turnaround of the company came this week as the carrier paid in full its secured debt obligations.

ICG was able to pay off its restricted debt thanks to a $107 million cash payment from Qwest Communications. The payment was made to allow Qwest to terminate four service contracts for an unknown number of dial-up access ports to be provided by ICG from 2000 through 2007. (An unknown portion of the $107 million was payment for the service from the end of June to the present.)

“[In 2000, Qwest was] supposedly planning to do more in the dial-up Internet space. That didn’t materialize, so [the lines] were under-utilized,” said the ICG spokesperson.

ICG forfeits the approximately $25 million per quarter it originally was to have earned through 2007 from the high-margin Qwest contracts—no small matter for a company that earned less than $98 million in total revenue during the second quarter.

But ICG used $83 million of the lump sum it received to pay off approximately $50.5 million in bank debt and a $25 million secured note from Cerberus Capital Management, the bondholder that helped it out of bankruptcy (interest and related charges bring the total to $83 million). This relieves ICG the interest on that debt--which amounted to about $2 million per quarter this year—and results in additional savings related to the debt’s covenants.

Covenants in ICG’s secured debt required that it maintain collateral cash deposits worth 75% of the balance of the loan. (After October 10, 2003, it would have become 50%.) Now that the debt has been retired, those covenants don’t exist, and ICG is free to use that cash--$44 million at the end of June--to improve operations.

The company will still have $104 million in debt, but it pertains to “capital leases, equipment, property—it’s not restricted,” said the spokeswoman.

Now that the restructuring is complete, ICG intends to focus on growing the business, particularly the corporate services division of the company, which currently represents 14% of ICG’s total revenues, the spokeswoman said.

The board will search for a replacement that has more telecom experience, said the spokeswoman. Prior to leading ICG, Curran was CEO of Thermodyne Holdings, a St. Louis manufacturer of welding products. Curran oversaw Thermodyne’s restructuring, earning a reputation as a turnaround expert in the eyes of ICG’s board.

Curran will remain at the company for 45 days while it searches for a successor.