SpectraSite to declare Chapter 11

The holding company for tower operator SpectraSite Communications today reached an agreement with its senior noteholders to enter into a prepackaged bankruptcy.

The bankruptcy announcement comes a no surprise and has been rumored for some time (see Telephony, Nov. 4. page 14). SpectraSite’s debt load had become a too-heavy burden in recent months, with the company posting a net loss of $127.6 million in on just $111.6 million in revenue for the second quarter.

According to the terms of the agreement, SpectraSite Holdings’ existing $1.8 billion in notes will be exchanged for 100% of the new company’s common stock, subject to dilution. The current stock will become worthless, but current holders of common stock will receive warrants to purchase up to five percent of the new stock. Sixty-six percent of SpectraSite Holdings’ senior note holders have agreed to a deal, enough for the agreement to gain approval from the bankruptcy court, a SpectraSite spokeswoman said.

The company must actually file for Chapter 11 by November 15 or the agreement with its senior note holders will expire. According to the spokeswoman, though, the company is in the process of assembling the materials necessary for a filing and fully intends to meet the deadline.

The company’s board and management team will remain in place during the bankruptcy proceedings. When the company exits Chapter 11, a new, five-member board will be elected, with one seat going to Steve Clark, the company’s CEO, who will remain in that role after bankruptcy.

The deal is not final, though. Completion of the restructuring plan is contingent on the completion of SpectraSite’s tower sale to Cingular Wireless or tower purchase from SBC Communications “on terms that are approved by the senior note holders.”

Despite having its parent declare bankruptcy, the spokeswoman said the subsidiary’s operations should not be affected: There will be no layoffs and no cancelled contracts with customers or vendors.

Given the company’s own timetable, though, one of these deals will have to be completed quickly. “The company hopes to emerge from bankruptcy early in the first quarter,” the spokeswoman said.