Allied Riser offering to repurchase debt

(Telephony) Allied Riser Communications is offering to buy back $150 million of outstanding 7.5% convertible notes issued last June.

The company is offering $280 for each $1000 note, plus accrued and unpaid interest up to, but not including, the date of payment. If ARC is able to purchase all of the outstanding notes, it will shell out about $42 million.

According to a company spokesman, the buyback is a method of positioning the company to raise further funding.

“If you look at the economy, I think everyone is trying to get themselves in a position where they can take advantage of the capital markets once the purse strings loosen,” he said.

In mid-April ARC announced that it had roughly $200 million in cash, enough to last it through 2002 or early 2003. Hopefully, by that time, the capital markets will be favorable, the spokesman said.

With the low interest rates on the outstanding notes, though, it is questionable whether ARC could get more attractive funding in the future.

“Seven and a half percent is not a high rate. Why would you want to get rid of that kind of debt? Generally, the motivation to call these things in is to get financing at a lower rate,” said Mario DeRose, fixed-income strategist with Edward Jones.

But the ARC spokesman said that, to his knowledge, the company did not have additional funding in the works.