Integra Telecom Converts Millions in Debt to Equity

Integra Telecom is cutting its debt load from $1.3 billion to $600 million by taking on new investors and converting borrowed money to equity.

The Portland, Ore.-based CLEC was in danger of technical default on its credit agreements, ratings agency Standard & Poor’s said in May; now it looks as though the new deals will avoid the prospect of bankruptcy for Integra. Also, the credit agreements affect just Integra’s balance sheet, the company said in a prepared statement. Operations and jobs are expected to remain intact.

The company’s new investors are Goldman, Sachs & Co., Tennenbaum Capital Partners and Farallon Capital Management. Integra said it started negotiating with lenders earlier this year “to better align the terms of its loans with today’s economy and the company’s business strategy.”

Integra’s debt skyrocketed when it bought Eschelon Telecom in 2007 for $710 million. The surrounding economic environment, which began to plummet that same year, didn’t do Integra any favors and the CLEC was slammed with several credit downgrades. Standard & Poor’s had not yet released its outlook on Integra in light of the lower debt amount.

The balance sheet restructuring still must get state and federal regulatory, as well as some shareholder, approvals. Integra expects the transaction to close by the end of the year.