Pac-West secures funding for buildout

Pac-West Telecomm, a company in the midst of an ambitious buildout of a national wholesale voice-over-IP network, today announced a major financial restructuring that includes significant new financing from Columbia Ventures, a major telecom venture capital player.

The new financial structure will better position Pac-West, which has been operating as a West Coast CLEC and wholesaler, to complete its network and the launch of a new turnkey VoIP product in alliance with VeriSign that provides all the means necessary to offer VoIP, said Hank Carabelli, Pac-West's president and CEO.

“Our network will be in place by the end of the fourth quarter,” Carabelli said. “This financing fills a gap that we had faced because of the decline of dial-up Internet revenues.”

Under the agreement, an affiliate of Columbia will provide Pac-West with a total of $24 million, which consists of an $8.0 million revolving credit facility and a $16.0 million term loan. Some $8.8 million of that amount is being used immediately to buy existing senior secured credit facility with Comerica Bank, and in the process free up $11.3 million being held by Comerica Bank under the terms of a compensating balance arrangement.

In addition, another affiliate of Columbia Ventures purchased an aggregate of 879,117 shares of two series of newly designated, non-voting, convertible preferred stock for about $1.0 million. Columbia Ventures will now hold four seats on Pac-West’s nine-person board of directors.

In addition, as part of the restructuring, Pac-West also was able to renegotiate existing debt, including $5.7 million with Merrill Lynch Capital and $2.8 million with an unnamed supplier to more favorable terms, Carabelli said.

“All three of these have the net effect of being able to go into 2007 and take the dollars you have and put them more to operating capital than finance charges,” he said. “It puts us in a better position from a cash flow perspective.”

Pac-West and VeriSign together are launching a wholesale service that gives any company that wants to offer VoIP all the things required, including E911 support, connections to the public switched network and VoIP infrastructure. Pac-West is providing a manual version of the service today over its existing West Coast footprint, Carabelli said, and is in discussions with potential customers for the national offering.

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