Teligent gets $250 million in funding

With its capital resources running low, Teligent has signed an agreement with first-time investor Rose Glen Capital Management garnering the company up to $250 million. According to the carrier, the investment completes the first phase of its new financing program. Teligent will use the capital to finance construction of its fixed wireless and fiber optic networks.

Under the terms of the agreement, at its discretion Teligent will sell $250 million of common stock to Rose Glen over an 18-month period. Teligent will also issue warrants to the investor for shares representing 6% of the commitment amount, at a 20% premium to an average market price at signing.

Given Teligent’s closing stock price of $3.469 on the day the investment was announced, $250 million would give Rose Glen over 50% of the company.

Such a purchase would have been almost unthinkable just this past spring. At its 52 week high of $97 in March, $250 million would have bought less than 4% of the carrier.

Still, said Jim Friedland, senior telecom services analyst at Robertson Stephens, the company had little choice.

“The quality of the deal [for Teligent] is best as could be expected in current market environment,” he said.

Compounding the poor capital market conditions, Teligent was fiscally in dire straits. In Security and Exchange Commission documents filed in April, the company said it had funding to operate through all of next year. In October, it announced that it had enough money to carry it into the second quarter of 2001 only, necessitating a drastic move.

Teligent, though, will almost certainly attempt to minimize dilutive effects of the investment by exercising the stock sale when its share price is up.

Unless the communications sector takes an unexpected upturn over the next few months, however, the company will most likely give away a significant portion of its business, making this a potential blockbuster deal for Rose Glen, said Friedland.

“From Rose Glen’s point of view, if Teligent can execute on its new business plan [of focusing on on-net services in its existing market combined with a move to wholesale services], then there’s a significant potential upside for their investment.”